Question

Joe company purchased $4,000 worth of merchandise. Joe paid transportation costs of $350. The company returned $275 worth of merchandise and then paid the invoice within the 2% cash discount period. The total cost of this merchandise is

A) $3,650.50
B) $3,993.50
C) $4,000.50
D) $4263.50

Answer 1

B) $3,993.50

Step-by-step explanation:

Total cost of inventory purchased = $4,000

Add: Transportation cost as will form part of cost $350

Total cost of inventory = $4,350

Less: Returned Inventory = ($275)

Net Purchase value = $4,075

Less: Discount 2% on above = $4,075
`*` 0.02 = ($81.5)

Net Cost of this merchandise = $3,993.50

Note: Transportation cost form part of cost of inventory as direct in nature and necessary to bring the inventory at its place, Further goods cost will be net of discount.

Net Cost of this merchandise = $3,993.50