A Company Purchased Inventory for $2,000 from a Vendor on Account

question 103

Multiple Choice

A company purchased 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 damaged goods worth $200. The invoice has been paid 8 days after the sale. Assuming that there was no beginning inventory balance, the cost of inventory would be: (Assume a perpetual inventory system)

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

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Definitions:

Contract

A legally binding agreement between two or more parties that is enforceable by law.

Mutual Consideration

The reciprocal exchange of value or promises within a contract, where each party agrees to give up something in return for receiving something else of value.

Subrogation

The process by which one party takes over the rights of another party, typically in the context of insurance claims.

Double Recovery

The act of obtaining compensation from two different sources for the same injury, loss, or damages, which is legally prohibited.