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21 June, 09:39

A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to

A. $12,670

B. $9,070

C. $8,420

D. $17,230

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Answers (1)
  1. 21 June, 11:02
    0
    Option (B) is correct.

    Explanation:

    Given that,

    Merchandise Inventory at the beginning of the year = $3,600

    Freight-In = $650

    Purchases = $10,700

    Purchases Returns and Allowances = $1,950

    Purchases Discounts = $330

    Net purchases = Purchases - Purchases Returns and Allowances - Purchases Discounts

    = $10,700 - $1,950 - $330

    = $8,420

    Cost of merchandise purchased = Net purchases + Freight-In

    = $8,420 + $650

    = $9,070
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