On February 1, 2020, in its first month of operation, Magnum Corporation purchased 100 units

of inventory on account at a cost of $12 per unit from its supplier. The payment terms to the

supplier were 2/10, net 30. Magnum also paid ABC Freight Company cash of $250 on February

1 as the shipping cost for the shipment from the supplier to Magnums warehouse.

On February 8, 2020, Magnum took advantage of the available discount and paid the supplier the

required amount for the inventory.

On March 5, 2020, Magnum received an order from its largest customer to purchase the entire

inventory at a total selling price of $1,800. The inventory was shipped and the customer was

billed on March 10, 2020. No discount was offered to the customer (terms were simply Net 30).

On March 10, 2020, Magnum also paid a $125 freight cost to ship it to the customer. (The

customer was not required to pay the freight cost). Magnum also incurred $100 of other

operating expenses during each month of February and March 2020.

1. As of February 29, 2020, inventory is presented on Magnums balance sheet at a

value of

A. $ 1,176.

B. $ 1,200.

C. $ 1,426.

D. $ 1,450.

E. $ 1,800.

2. The shipment of inventory by the supplier to Magnum via ABC Freight Company

was apparently made with which of the following terms?

A. FOB Destination.

B. FOB Shipping Point.

C. Neither of the above.

D. Not enough information has been provided.

3. Gross profit for the month of March 2020 was

A. $ 149.

B. $ 174.

C. $ 374.

D. $ 399.

4. Operating profit for the month of March 2020 was

A. $ 49.

B. $149.

C. $299.

D. $399.