Select Apparel purchased 90 new shirts and recorded a total cost of $2,675 determined as follows:

Select Apparel purchased 90 new shirts and recorded a total cost of $2,675 determined as follows:

Invoice cost	$	2,190
Shipping charges		191
Import taxes and duties		163
Interest (6.0%) on $2,190 borrowed to finance the purchase		131
	$	2,675

 

Prepare the journal entry to record this purchase in the correct amount, assuming a perpetual inventory system. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation:

To record the purchase of 90 new shirts in accordance with the cost principle (perpetual inventory system):

Cost: $2,190 + $191 + $163 = $2,544.

 

The $131 interest expense is not a proper cost of the merchandise; it is recorded as prepaid interest expense and later as interest expense.