5) A company purchased inventory for $7/4,000 from a vendor on account, FOB ship

Question

5) A company purchased inventory for $7/4,000 from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company paid the shipper $1,600 cash for freight in. The company paid the vendor nine days after the invoice date. If there was no beginning inventory, the cost of inventory would be (Assume a perpetual inventory system) A) $70,180 B) $73,380 C) $74,120 D) $75,600 6) The terms of an invoice are 3/10, n/25. This means that a of the invoice date. A) discount of 3 percent is allowed if the invoice is paid within 10 days after the invoice date B) discount of 10 percent is allowed if the invoice is paid within three days after the invoice date C) discount of 25 percent is allowed if the invoice is paid within 10 days after the invoice date D) discount of 3 percent is allowed if the invoice is paid after 25 days after the invoice date Under which of the following terms will the buyer be required to pay transporta tation costs? A) FOB shipping point C) FOB destination B) delivery expense D) freight out A company that uses the perpetual inventory system purchases inventory for $62,000 on account, with terms of 2/10, n/30. Which of the following is the journal entry to record the payment made within 10 days? A) a debit to Accounts Payable for $60,760, a debit to Merchandise Inventory for $1,240, and a B) a debit to Accounts Payable for $62,000, a credit to Merchandise Inventory for $1.240, and a C) a debit to Accounts Payable for $62,000, a credit to Cash for $1.240, and a credit to D) a debit to Merchandise Inventory for $1.240, a debit to Accounts Payable for $62,00,and a credit to Cash for $62,000 credit to Cash for $60,760 Merchandise Inventory for $60,760 credit to Cash for $63,240

Explanation / Answer

Amount 1 Particulars $ Inventory cost Purchased From Vendor (On Account) 74000 Less : Discount (2%) -1480 Net Payment Made to Vendor 72520 Add :Freight Cost 1600 Inventory Cost 74120 Option - C 2 The term 3/10, n/25 is a credit term and means the following: "3" shows the discount percentage offered by the seller. "10" indicates the number of days (from the invoice date) within which the buyer should pay the invoice in order to receive the discount. "n/25" states that if the buyer does not pay the (full) invoice amount within the 10 days to qualify for the discount, then the net amount is due within 25 days after the sales invoice date. Therefore, discount of 3 Percent is allowed if the invoice is paid within 10 days after the invoice date. Option -(A) 3 FOB Shipping Point indicating that the buyer must pay to get the goods delivered. i.e. transporation costs.Therefore, This means that goods in transit should be reported as a purchase and as inventory by the buyer. Option- (A) Journal Entries 4 Merchandise Inventory Dr 62000 To Account Payable 62000 Account Payable   Dr 62000 To Merchandise Inventory 1240 (62000*98%) To cash 60760 Therefore, Option (B) is Correct Answer.

Related Questions

Navigate

• Browse (All)
• Browse 5
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.