Question

Cinnamon Buns Co. (CBC) started 2021 with $61,500 of merchandise on hand. During 2021, $299,000 in merchandise was purchased on account with credit terms of 2/10, n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $18,500. Merchandise with an invoice amount of $7,800 was returned for credit. Cost of goods sold for the year was $335,000. CBC uses a perpetual inventory system.

Assuming CBC uses the gross method to record purchases, ending inventory would be:

Answer 1

$30,220

Step-by-step explanation:

Inventory purchased $299,000

Discount (299,000*2%) ($5,980)

Freight Charges $18,500

Inventory returned ($7,800)

Net purchases $303,720

Cost of goods sold=opening inventory+purchases-ending inventory

$335,000=$61,500+$303,720-ending inventory

Ending inventory=61,500+303,720-335,000

Ending inventory=$30,220