Chapter 5, Problem 1SSQ

To determine

Calculate the cost of merchandise purchased by Company T.

Answer to Problem 1SSQ

Option c. $2,746.

Explanation of Solution

Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a trader, to be sold within a year. Merchandise Inventory is a current asset account which includes all the costs incurred to acquire merchandise, and process it further for sale.

Discount period: Discount period is the maximum amount of time (in days) offered by the buyer to the seller for the payment of the cash discount claimed by the buyer. The notation “2/10 (Given)” indicates discount of 2% of the invoice price and discount period of 10 days following the date of invoice.

Credit period: Credit period is a stipulated period of time, expressed in days that allows a purchaser to make payment to the seller for the purchased goods, when the goods are sold on credit. The notation “n/30” indicates a credit period of 30 days.

Calculate the total cost of the merchandise of Company T.

Particulars	Amount ($)
Invoice price of merchandise	2,700
Less: Discount $\left(2,700\times 2\%\right)$	54
Cost of merchandise after discount	2,646
Add: Transportation cost	100
Total cost of merchandise	2,746

Table (1)

The total cost of purchased merchandise for Company T is 2,746.

From the above computation, Options a. b. and d. are icorrect answers. Thus, the correct answer is Option c.

Conclusion

Hence, correct answer is Option c. $2,746.