Question

The following information applied to Fenn, Inc. for 2005:

Merchandise purchased for resale $400,000
Freight-in 10,000
Freight-out 5,000
Purchase returns 2,000
Fenn's 2005 inventoriable cost was
A. $400,000
B. $403,000
C. $408,000
D. $413,000

Answer 1

The 2005 inventoriable cost for Fenn, Inc. is $410,000.

Step-by-step explanation:

The 2005 inventoriable cost for Fenn, Inc. can be calculated by adding the merchandise purchased for resale, freight-in, and any additional costs incurred in getting the merchandise ready for sale, and then subtracting any returns. In this case, the merchandise purchased for resale is $400,000, the freight-in is $10,000, and there are no returns mentioned. Therefore, the formula would be: $400,000 + $10,000 = $410,000.

Answer 2

Fenn, Inc.'s inventoriable cost for 2005 is calculated by adding the merchandise purchased for resale ($400,000) with the freight-in costs ($10,000) and subtracting the purchase returns ($2,000), resulting in a total of $408,000.

Step-by-step explanation:

To calculate Fenn, Inc.'s inventoriable cost for 2005, we start with the merchandise purchased for resale which amounts to $400,000. From there, we add the freight-in costs, which are directly associated with bringing the merchandise to the place of business, amounting to $10,000. Next, we subtract the purchase returns, which are the goods returned to suppliers, and that is $2,000. We do not include the freight-out costs, as they pertain to the delivery of goods to customers and are not part of inventory costs. Therefore, the calculation is as follows:

• Merchandise purchased: $400,000
• Freight-in: + $10,000
• Purchase returns: - $2,000

When we tally these numbers, we get an inventoriable cost of $400,000 + $10,000 - $2,000 = $408,000 ( Option C).