Answer to Question #301030 in Finance for Rival

Question

Madison Inc. has bought 51 000 USD worth of calculators (inventory) on account for resale in the local market. Freight expenses were 2 000 USD. Payment terms was 4/10 n/40. The company had 3 000 USD allowances because some calculators were broken while shipping to the company. The company paid for the inventory on the 5^th day of the contract (within the discount period). Considering this information alone calculate the balance in the inventory account for this transaction and show your work.

Answer 1

Purchase Price of the calculators (Inventory).............................. 51,000 USD

Add : Freight Expenses....................................................................2,000 USD

Less : Purchase Allowance............................................................. (3,000) USD

Less : Purchase discount(51,000 USD-3,000 USD)*4/100.............(1,920)

Balance in inventory account.....................................................48,080 USD