A Company That Uses the Perpetual Inventory Method Purchases Inventory

question 77

Multiple Choice

A company that uses the perpetual inventory method purchases inventory for $2,000 from a vendor on account,FOB shipping point,with terms of 2/10,n/30.The company paid the shipper $100 cash for freight in.
-The company then returned $200 of damaged goods and got an allowance from the vendor.The company paid the vendor 8 days after the sale.Assuming this was the only transaction affecting inventory,and that there was no beginning balance,what would the cost basis of the inventory be?

• A) $1,764
• B) $1,864
• C) $2,100
• D) $1,900

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Definitions:

Conciliation

A process in which a neutral third party assists disputing parties to reach a mutually agreeable solution.

Arbitration

A process where a dispute is resolved by an impartial third party whose decision the involved parties agree to accept.

Precedent

A tool used by judges to make rulings on cases on the basis of key similarities to previous cases.

Arbitration

A method of dispute resolution where an impartial third party (the arbitrator) makes a decision to resolve the issue, which is usually binding on the parties.