During the months of January and February, Axe Corporation purchased goods from

Question

During the months of January and February, Axe Corporation purchased goods from three suppliers. The sequence of events was as follows: Jan. 6 Purchased goods for $800 from Green with terms 3/12, n/45. 6 Purchased goods from Munoz for $600 with terms 2.5/12, n/45. 14 Paid Green in full. Feb. 2 Paid Munoz in full. 28 Purchased goods for $100 from Reynolds with terms 2.5/12, n/45. Required: Assume that Axe uses a perpetual inventory system, the company had no inventory on hand at the beginning of January, and no sales were made during January and February. Calculate the cost of inventory as of February 28.

Explanation / Answer

Calculation of Cost of Inventory:

Discount on goods purchased from Green = 800 x 3% = $24

No discount from Munoz because the payment is made after discount period.

Amount($) Inventory of Jan 6 800 Less: Disocunt on Inventory 24 Inventory of Jan 6 600 Inventory of Feb. 28 100 Total Cost of Inventory as of Feb 28 1,476

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