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22 February, 08:14

Assume that Gallant Company uses a periodic inventory system and has these account balances: Purchases $484,050, Purchase Returns and Allowances $12,430, Purchase Discounts $9,150, and Freight-In $16,520. Determine net purchases and cost of goods purchased. g

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  1. 22 February, 10:47
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    Net purchases = $462,470

    Cost of goods purchased = $478,990

    Explanation:

    The net purchase is the difference between the total purchases and the Purchase Returns and Allowances and discounts. The freight-In is an element of the cost of goods purchased.

    The cost of goods purchased is the sum of net purchases and freight-In.

    Mathematically,

    Net purchase = Purchases - Purchase returns and allowances - purchase discount

    = $484,050 - $12,430 - $9,150

    = $462,470

    Cost of goods purchased

    = Net purchases + Freight-In

    = $462,470 + $16,520

    = $478,990
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