Cinnamon Buns Co. (CBC) started 2016 with $52,300 of merchandise on hand. During

Question

Cinnamon Buns Co. (CBC) started 2016 with $52,300 of merchandise on hand. During 2016, $299,000 in merchandise was purchased on account with credit terms of 3/10 n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $10,700. Merchandise with an invoice amount of $2,100 was returned for credit. Cost of goods sold for the year was $306,000. CBC uses a perpetual inventory system. What is cost of goods available for sale, assuming CBC uses the gross method?

$350,993. $329,593. $359,900. $362,000.

Explanation / Answer

opening balance of inventory = 52300

purchase during the year      = 299000

total inventory cost during the year = 52300+299000+10700 = 353030

Purchase retrun = 2100

net purchase return after disocunt = 2100*3% = 63 = 2100-63 = 2037

cost of goods available for sale assuming Gross method = 353030 - 2037 = 350993

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