Northwest Fur Co. started 2016 with $114,000 of merchandise inventory on hand. D

Question

Northwest Fur Co. started 2016 with $114,000 of merchandise inventory on hand. During 2016, $410,000 in merchandise was purchased on account with credit terms of 2/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $8,300. Merchandise with an invoice amount of $4,000 was returned for credit. Cost of goods sold for the year was $373,000. Northwest uses a perpetual inventory system. What is ending inventory assuming Northwest uses the gross method to record purchases?

Explanation / Answer

Beginning inventory = $114,000
Inventory purchased = $410,000
Freight = $8,300
Merchandise returned = $4,000
Discount = ($410,000-$4,000)*2%
= $8120
Cost of goods Available for sale = $410,000+$114,000+$8300-$4000-$8120
= $520,180
Cost of goods sold = $520,180-$$373000
= $147,180

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