Question

Question 2 2.5 p Jackson Company reported the following information relating to its inventory for 2020: sales revenue ......... freight-in ............. purchase returns ................ cost of goods available for sale ......... purchases ......... gross profit ...................... freight-out .............. purchase discounts ......... ..... $427,000 10,980 16,590 419, 250 392,800 96,250 11,730 ? Jackson Company reported an inventory turnover ratio of 4.20 for 2020. Calculate the amount of purchase discounts reported by Jackson Company during 2020.

Answer 1

Solution:

Amount of Purchase Discounts reported by Jackson Company during 2020 = $ 36,940

Purchases	$         392,800
Add: Freight In	$           10,980
Less: Purchases returns	$         (16,590)
Less: Net Purchases(Notes)	$       (350,250)
Purchase Discount	$           36,940

Notes:

Sales Revenue	$         427,000
Less: Gross Profit	$         (96,250)
Cost Of goods sold	$         330,750
Cost of goods available for sale	$         419,250
Less: Cost Of goods sold	$       (330,750)
Ending Inventory	$           88,500
Cost Of goods sold	$         330,750
Divide By: Inventory Turnover Ratio	4.2
Average Inventory	$           78,750

Average Inventory = (Beginning Inventory + Ending Inventory) / 2

$ 78,750 = ( Beginning Inventory + $88,500) / 2

Beginning Inventory = ($ 78,750 * 2 ) - $88,500 = $ 69,000

Cost of goods available for sale	$         419,250
Less: Beginning Inventory	$         (69,000)
Net Purchases	$         350,250