During the month of June, Ace Incorporated purchased goods from two suppliers. The sequence of events was as follows: June 3 Purchased goods for $4,800 from Diamond Inc. with terms 3/12, n/45. 5 Returned goods costing $1,450 to Diamond Inc. for credit on account. 6 Purchased goods from Club Corp. for $1,350 with terms 3/12, n/45. 11 Paid the balance owed to Diamond Inc. 22 Paid Club Corp. in full. Required: Assume that Ace uses a perpetual inventory system and that the company had no inventory on hand at the beginning of the month. Calculate the cost of inventory as of June 30.

Solution and Explanation:

Calculation of the cost of inventory as of June is as follows:

Particulars                                             Amount                                 Amount

                                                   (in dollars)                                  (In dollars)

Begnining inventory                                                                               0.00

Purchases:

June 3rd from D inc.                                 4800

June 6th from C corp.                              1350                                   6150

Total available                                                                                    6150

Less: Returned to D Inc.                            1450

Less: the allowance and discounts                 100.50                                1550.50

(($4800 minus $1450) multiply 3 percent)

Cost of the inventory as of June 30                                                 4599.50

Thus, the cost of inventory as per the above calculations is $4599.50

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