Assume the Perpetual Inventory Method Is Used

question 23

Multiple Choice

Assume the perpetual inventory method is used.
1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30.
2) The company returned $1,200 of merchandise to the supplier before payment was made.
3) The liability was paid within the discount period.
"4) All of the merchandise purchased was sold for $18,800 cash.
The net cash flow from operating activities as a result of the four transactions is:"

• A) $5,100.
• B) $7,726.
• C) $6,550.
• D) $11,074.

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Definitions:

Marginal Cost

The expense incurred from the manufacture of an additional single unit of a product or service.

Quantity Discount

A reduction in price per unit of a good or service based on the amount of the purchase, used to encourage larger orders.

Aluminum

A lightweight, silvery-white metallic element used broadly in manufacturing and construction due to its strength and corrosion resistance.

Marginal Analysis

An examination of the additional benefits of an activity compared to the additional costs incurred by that same activity.