Recording an Inventory Purchase

Shields Company has purchased inventories incurring the following costs: (a) the invoice amount of $4,000,(b) shipping charges of $240, (c) interest of $80 on the $4,000 borrowed to finance the purchase and (d) $40 for the cost of moving the inventory to the company's warehouse.

Required

a) Determine the cost to be assigned to the inventory.

ANS

b.Record the purchase using "T" accounts. (Inventory(A), Accounts Payable(L), Notes Payable(L), Interest Expense. Discounts Lost(E)