Question

Cinnamon Buns Co. (CBC) started 2021 with $53,600 of merchandise on hand. During 2021, $291,000 in merchandise was purchased on account with credit terms of 3/10 n/30. All discounts were taken. Purchases were all made f.o.b. shipping point. CBC paid freight charges of $9,600. Merchandise with an invoice amount of $3,900 was returned for credit. Cost of goods sold for the year was $309,000. CBC uses a perpetual inventory system.

Assuming CBC uses the gross method to record purchases, ending inventory would be:

Multiple Choice

• A $23,087.

• B $32,570.

• C $32,687.

• D $41,300.

Answer 1

C. $32,687

Beginning inventory	$53,600
Inventory purchased	$291,000
Freight	$9,600
Merchandise returned	($3,900)
Discounts [($291,000 – $3,900) x 3%)]	($8,613)
Cost of goods available for sale	$341,687
Cost of goods sold	($309,000)
Ending inventory	$32,687