Question

Novak’s Market recorded the following events involving a recent purchase of inventory: Received goods for $112000, terms 2/11, n/30. Returned $2200 of the shipment for credit. Paid $400 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company’s inventory increased by $110200. increased by $107604. increased by $108004. increased by $107996.

Answer 1

Option (C) is correct

Step-by-step explanation:

The payment is made during the discount period of 11 days so the 2% discount rate would be applicable.

Goods purchased = $112,000

Goods returned = $2,200

Discount = (Goods purchased - goods returned) × 2%

= ($112,000 - $2,200) × 2%

= $2,196

Net purchase = Goods purchased - returned - Discount

= $112,000 - $2,200 - $2,196

= $107,604

Total inventory cost = Net purchase + Freight cost

= $107,604 + $400

= $108,004

Therefore, company’s inventory increased by $108,004.