Benz Inc. shows the following account balances for last month: Freight In.......

Question

Benz Inc. shows the following account balances for last month:

Freight In..............................................................................       $ 1,875

Freight Out...........................................................................           2,500

Purchases..............................................................................         28,000

Purchase Discounts..............................................................           2,500

Sales Returns and Allowances..............................................           4,000

The cost of goods purchased for last month is, and please show the calculation.

(a) $25,875.

(b) $27,375.

(c) $29,875.

(d) $30,500.

(e) none of the above.

Explanation / Answer

Freight charges incurred tobring goods in the factory or business are considered to be a part of cost of goods purchased.

As purchase discount are to be deducted because we have to pay less to the creditors .

Cost of goods purchased = purchase - purchase discount + freight in charges .

= 28000 - 2500 + 1875

= 27375

Freight out is not a part of cost of goods purchased hence not included in above calculations.

Hence option B is correct

Please please upvote it at the end thank you so much

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