Ivanhoe Wholesalers uses a perpetual inventory system.

Mar. Stellar Stores purchases $9,400 of merchandise for resale from Ivanhoe Wholesalers, terms 2/10, n/30, FOB shipping

1

point.

2 The correct company pays $175 for the shipping charges.

3

21

Stellar returns $1,200 of the merchandise purchased on March 1 because it was the wrong colour. Ivanhoe gives Stellar a $1,200 credit on its account.

Stellar Stores purchases an additional $12,000 of merchandise for resale from Ivanhoe Wholesalers, terms 2/10, n/30,

FOB destination.

22

The correct company pays $175 for freight charges.

Stellar returns $300 of the merchandise purchased on March 21 because it was damaged. Ivanhoe gives Stellar a $300

23

credit on its account.

﻿﻿﻿Stellar paid Ivanhoe the amount owing for the merchandise purchased on March 1.

﻿﻿﻿Stellar paid Ivanhoe the amount owing for the merchandise purchased on March 21,

Additional information:

Mar.

1

Ivanhoe's cost of the merchandise sold to Stellar was $4,100.

3

Ivanhoe's cost of the merchandise returned by Stellar was $523. As the merchandise was not damaged, it was returned to Ivanhoe's inventory.

21

Ivanhoe's cost of the additional merchandise sold to Stellar Stores was $5,234.

Ivanhoe's cost of the merchandise returned by Stellar was $131. As the merchandise was damaged, it was put in the

23

recycling bin.

Calculate Ivanhoe's net sales, cost of goods sold, and gross profit for these sales.

Net sales

$

Cost of goods sold

$

1

Gross profit

$

To calculate Ivanhoe's net sales, cost of goods sold, and gross profit for the transactions in March, we will go through each transaction step by step:

### Net Sales Calculation

1. **March 1: Sale to Stellar Stores**
   - Initial sale: $9,400
   - Return on March 3: $1,200
   - Discount for early payment (2% of $9,400 - $1,200): $ 2\% \times 8,200 = 164 $

   Net sales for March 1 transaction: $ 9,400 - 1,200 - 164 = 8,036 $

2. **March 21: Additional Sale to Stellar Stores**
   - Initial sale: $12,000
   - Return on March 22: $300
   - Discount for early payment (2% of $12,000 - $300): $ 2\% \times 11,700 = 234 $

   Net sales for March 21 transaction: $ 12,000 - 300 - 234 = 11,466 $

Total Net Sales for March: $ 8,036 + 11,466 = 19,502 $

### Cost of Goods Sold Calculation

1. **March 1: Cost of goods sold**
   - Initial cost: $4,100
   - Cost of returned merchandise: $523

   Cost of goods sold for March 1 transaction: $ 4,100 - 523 = 3,577 $

2. **March 21: Cost of goods sold**
   - Initial cost: $5,234
   - Cost of returned merchandise (damaged, not restocked): $131

   Cost of goods sold for March 21 transaction: $ 5,234 - 131 = 5,103 $

Total Cost of Goods Sold for March: $ 3,577 + 5,103 = 8,680 $

### Gross Profit Calculation

Gross Profit: Net Sales - Cost of Goods Sold

Gross Profit: $ 19,502 - 8,680 = 10,822 $

### Summary

- **Net Sales**: $19,502
- **Cost of Goods Sold**: $8,680
- **Gross Profit**: $10,822

Would you like further details or have any questions? Here are five questions you might want to ask:

1. How are discounts calculated in perpetual inventory systems?
2. What is the FOB shipping point and FOB destination difference?
3. How are returned goods treated in inventory systems?
4. What other costs are considered in the cost of goods sold?
5. How does early payment discount affect net sales?

**Tip:** Always check for return policies and terms of sale, such as discounts for early payments, when managing inventory and accounting transactions.

Learn how to calculate Ivanhoe Wholesalers' net sales, cost of goods sold, and gross profit using a perpetual inventory system. This problem involves transactions, returns, discounts, and shipping terms. Suitable for business accounting or finance professionals.

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