What dollar amounts should be reported for final inventory

Reference no: EM132771718

Question - Crane Corp. purchased merchandise during 2020 on credit for $845,000; terms 3/10, n/30. All of the gross liability except $100,000 was paid within the discount period. The remainder was paid within the 30-day term. At the end of the annual accounting period, December 31, 2020, 90% of the merchandise had been sold and 10% remained in inventory. The company uses a periodic system.

Assuming that the net method is used for recording purchases, prepare the entries for the purchase and two subsequent payments.

What dollar amounts should be reported for the final inventory and cost of goods sold under the net method? Assume that there was no beginning inventory.

What dollar amounts should be reported for the final inventory and cost of goods sold under the gross method? Assume that there was no beginning inventory.

1. Assuming that the $22,350 discount is prorated between the cost of goods sold, 90%, and the final inventory, 10%.

2. Assuming that the $22,350 discount is used to reduce cost of goods sold. Final inventory is carried at the gross amount.

Reference no: EM132771718

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