question archive A company uses the perpetual method for inventory and records purchases at gross
A company uses the perpetual method for inventory and records purchases at gross
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A company uses the perpetual method for inventory and records purchases at gross. In 20X4, it has total merchandise purchases of $324,000. It returns $19,000 of the merchandise for full credit, receives $7,000 in allowances from its vendors for defective merchandise, and takes cash discounts of $1,000. What is the net cost of the company's 20X4 merchandise purchases?
a. $297,000
b. $298,000
c. $305,000
d. $324,000
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The net cost of purchases is cost of purchases minus returns and allowances plus freight in.
Net cost = Purchases + Freight in - Purchase returns - Purchase allowances and discounts
Net cost = $324,000 + 0 - 19,000 - 7,000 - 1,000
Net cost = $297,000
The answer is a. $297,000.
