Question

Debra Company began operations on June 1. The following transactions took place in June: a. Purchases of merchandise on account were $1,200,000. b. The cost of freight to receive the inventory was $40,000. This was paid in cash. c. Debra returned $20,000 of the merchandise due to an ordering error. Debra received a full credit for the return. d. Debra paid the remaining balance for the merchandise. Calculate the dollar amount that Debra will have in inventory at the end of the month. Assume Debra uses the perpetual inventory system and there were no sales.

Answer 1

Debra's ending inventory amount, calculated using the given inventory transactions and assuming no sales occurred, is $1,220,000 for the month of June.

Step-by-step explanation:

We are going to calculate the ending inventory amount for Debra Company using the following inventory transactions:

1. Purchases of merchandise on account: $1,200,000.
2. Freight costs: $40,000 (paid in cash).
3. Return of merchandise: $20,000 (full credit received).
4. Payment for the merchandise after the return.

The calculation proceeds as follows:

1. Begin with the initial purchases: $1,200,000.
2. Add freight costs, since they are part of inventory cost: $1,200,000 + $40,000 = $1,240,000.
3. Subtract the cost of goods returned: $1,240,000 - $20,000 = $1,220,000.

The ending inventory will be $1,220,000, assuming there were no other transactions affecting inventory and Debra uses the perpetual inventory system with no sales taking place.

Answer 2

The dollar amount that Debra will have in inventory at the end of the month is $ 1,220,000.

Step-by-step explanation:

This problem requires us to calculate the cost of ending inventory. The cost can be calculated by adding all cost incurred on acquisition of inventory in purchase price of inventory. All cost such as freight cost, shipping cost, transit cost, insurance premium are included in cost of inventory. Detail calculations are given below.

Purchase merchandise = $ 1,200,000

Purchase Return = $ (20,000)

Freight = $ 40,000

Inventory Cost = $ 1,220,000