Cinnamon Buns Co. (CBC) started 2021 with $52,000 of merchandise
on hand. During 2021, $280,000 in merchandise was purchased on
account with credit terms of 2/10, n/30. All discounts were taken.
Purchases were all made f.o.b. shipping point. CBC paid freight
charges of $9,000. Merchandise with an invoice amount of $4,000 was
returned for credit. Cost of goods sold for the year was $316,000.
CBC uses a perpetual inventory system.
What is cost of goods available for sale, assuming CBC uses the
gross method?
A. 312480
B. 326000
C. 331480
D.337000
The correct answer is D) $337,000.
Supporting calculations:
| Beginning merchandise inventory | $52,000 |
| Add: Purchases | $280,000 |
| Add: Freight charges under FOB Shipping point | $9,000 |
| Less: Merchandise returned | ($4,000) |
| Cost of goods available for sale under gross method | $337,000 |
Buyer is responsible to pay the freight charges under FOB Shipping point so the cost of freight charges will be added to the cost of merchandise purchased.
Therefore, cost of goods available for sale under gross method is $337,000.
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