Debra Company began operations on June 1. The following transactions took place in June: a. Purchases of merchandise on account were $1,200,000. b. The cost of freight to receive the inventory was $40,000. This was paid in cash. c. Debra returned $20,000 of the merchandise due to an ordering error. Debra received a full credit for the return. d. Debra paid the remaining balance for the merchandise. Calculate the dollar amount that Debra will have in inventory at the end of the month. Assume Debra uses the perpetual inventory system and there were no sales.

Question

Business

Isiah

15 June, 19:40

Debra Company began operations on June 1. The following transactions took place in June: a. Purchases of merchandise on account were $1,200,000. b. The cost of freight to receive the inventory was $40,000. This was paid in cash. c. Debra returned $20,000 of the merchandise due to an ordering error. Debra received a full credit for the return. d. Debra paid the remaining balance for the merchandise. Calculate the dollar amount that Debra will have in inventory at the end of the month. Assume Debra uses the perpetual inventory system and there were no sales.

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Sloan · Answer 1

The dollar amount that Debra will have in inventory at the end of the month is $ 1,220,000.

Explanation:

This problem requires us to calculate the cost of ending inventory. The cost can be calculated by adding all cost incurred on acquisition of inventory in purchase price of inventory. All cost such as freight cost, shipping cost, transit cost, insurance premium are included in cost of inventory. Detail calculations are given below.

Purchase merchandise = $ 1,200,000

Purchase Return = $ (20,000)

Freight = $ 40,000

Inventory Cost = $ 1,220,000