Asked by Raymond Shaquille on Apr 27, 2024
Verified
Refer to Exhibit 8-1.Walters uses a perpetual inventory system and the net price method.
A) $42, 000
B) $56, 000
C) $67, 200
D) $70, 000
Perpetual Inventory System
An accounting method that records inventory transactions in real-time, thus providing a continual account of inventory balances.
Net Price Method
The net price method calculates the final price after all discounts, rebates, and allowances have been subtracted from the list price.
Catalog Price
The price listed in a catalog, not accounting for any discounts or promotions.
- Determine the cost of inventory purchases and the effect of payment terms on inventory cost recording.
Verified Answer
AA
Abdullah Al RikabiApr 29, 2024
Final Answer :
C
Explanation :
Using the net price method, we can calculate the cost of the raw materials as follows:
Catalog price: $70,000
Discount (4% of $70,000): $2,800
Net cost: $67,200
Since Walters uses a perpetual inventory system, the inventory would be recorded at the net cost of $67,200 on March 2, 2010.
Catalog price: $70,000
Discount (4% of $70,000): $2,800
Net cost: $67,200
Since Walters uses a perpetual inventory system, the inventory would be recorded at the net cost of $67,200 on March 2, 2010.
Learning Objectives
- Determine the cost of inventory purchases and the effect of payment terms on inventory cost recording.