Question

Tony's Market recorded the following events involving a recent purchase of inventory:Received goods for $40,000, terms 2/10, n/30.Returned $800 of the shipment for credit.Paid $200 freight on the shipment.Paid the invoice within the discount period.As a result of these events, the company's inventoryA)increased by $38,416.B)increased by $39,400.C)increased by $38,612.D)increased by $38,616

Answer 1

Answer:

D) increased by $38,616

Explanation:

The computation of the inventory is shown below:

= Goods received - returned goods - discount + freight expense

where,

Discount = (Goods received - returned goods) × rate

               = ($40,000 - $800) × 2%

               = $39,200 × 2%

               = $784

The other items values would remain the same

Now put these values to the above formula  

So, the value would equal to

= $40,000 - $800 - $784 + $200

= $38,616

The $38,616 reflect increase in the inventory

Answer 2

The inventory of the company should be option D) increased by $38,616

Calculation of the inventory:

= Goods received - returned goods - discount + freight expense

Here

Discount = (Goods received - returned goods) × rate

              = ($40,000 - $800) × 2%

              = $39,200 × 2%

              = $784

Goods received is $40,000

Returned goods is $800

And, the freight expense is $200

So, the inventory should be

= $40,000 - $800 - $784 + $200

= $38,616

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