Question

Assume that Gallant Company uses a periodic inventory system and has these account balances: Purchases $484,050, Purchase Returns and Allowances $12,430, Purchase Discounts $9,150, and Freight-In $16,520. Determine net purchases and cost of goods purchased. g

Answer 1

Net purchases = $462,470

Cost of goods purchased = $478,990

Step-by-step explanation:

The net purchase is the difference between the total purchases and the Purchase Returns and Allowances and discounts. The freight-In is an element of the cost of goods purchased.

The cost of goods purchased is the sum of net purchases and freight-In.

Mathematically,

Net purchase = Purchases - Purchase returns and allowances - purchase discount

= $484,050 - $12,430 - $9,150

= $462,470

Cost of goods purchased

= Net purchases + Freight-In

= $462,470 + $16,520

= $478,990