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Northwest Fur Co. started 2021 with $100,000 of merchandise inventory on hand. During 2021, $570,000 in merchandise was purchased on account with credit terms of 3/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $7,600. Merchandise with an invoice amount of $3,300 was returned for credit. Cost of goods sold for the year was $379,000. Northwest uses a perpetual inventory system. What is ending inventory assuming Northwest uses the gross method to record purchases

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Answer:

$278,299

Explanation:

For computing the ending inventory first we have to determine the cost of goods available for sale which is shown below:

Beginning inventory $100,000

Inventory purchased $570,000

Freight  $7,600

Merchandise returned $3,300

Discount = ($570,000 -$3,300) × 2%

= $17,001

Now Cost of goods Available for sale is

= Opening inventory + purchase + freight - returned goods - discount

= $100,000 + $570,000 + $7,600 - $3,300 - $17,001

= $657,299

And, the cost of goods sold is $379,000

So, the ending inventory is

= $657,299 - $379,000

= $278,299

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