On June 3, 2014, Hunt Company sold to Ann Mount merchandise having a sales price

Question

On June 3, 2014, Hunt Company sold to Ann Mount merchandise having a sales price of $8,000 (cost $5,600) with terms of 2/10, n/60, f.o.b. shipping point. Hunt estimates that merchandise with a sales value of $800 will be returned. An invoice totaling $120, terms n/30, was received by Mount on June 8 from Olympic Transport Service for the freight cost. Upon receipt of the goods, on June 5, Mount notified Hunt that $300 of merchandise contained flaws. The same day, Hunt issued a credit memo covering the defective merchandise and asked that it be returned at Hunt’s expense. Hunt estimates the returned items to have a fair value of $120. The freight on the returned merchandise was $24, paid by Hunt on June 7. On June 12, the company received a check for the balance due from Mount

I was trying to figure out the estimated cost of inventory returns on June 3, 2014. The total cost of inventory is $5600 (sale price $8000), but they do not give you a cost per item. They estimate $800 (sale price) will be returned. I tried to calculate by getting a percentage (8000/5600) and then multiplying by $800 to get $1142.86, but system says its wrong.

Explanation / Answer

Estimated Cost of Inventory Returns Sale Price of Goods Sold 8000 Estimated Sales Returns 800 % of sales returns 10% Cost of Goods Sold to Sales 70% $ Assuming the same percentage for sales returns of $ 300, the cost of inventory returned by Ann Mount = 210 Freight Paid by Hunt on the returned inventory 24 Total Estimated Cost of Inventory Returns 234

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