Question

The following information for Year 2 is taken from the accounts of Tuttle Company. The company uses the periodic inventory system. Inventory, December 31, Year 1 $ 9,600 Purchases 41,600 Purchase returns and allowances 760 Purchase discounts 560 Freight on goods purchased under terms FOB shipping point 1,760 Freight on goods sold under terms FOB destination 960 Cost of goods sold 30,000 Based on this information, what is the inventory at December 31, Year 2

Answer 1

Answer:

$21,640

Explanation:

For computing the ending inventory for the year 2 we need to do the following calculations which are shown below:

Ending inventory for the year 2 = Beginning inventory + cost of goods purchased - cost of goods sold

where,

Beginning Inventory = $9,600

Cost of Goods Purchased = Purchase - Purchase Returns - Purchase Discounts + Freight on Goods   under shipping point

= $41,600 - $760 - $560 + $1,760

= $42,040

And, the cost of goods sold is $30,000

So, the ending inventory for the year 2 is

= $9,600 + $42,040 - $30,000

= $21,640

We simply applied the above formula