PE 6-4A Freight terms

Determine the amount to be paid in full settlement of each of two invoices, (a) and (b), assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period.


Merchandise
Freight
Paid by Seller Freight Terms
Returns and
Allowances
a. $180,000 $3,000 FOB shipping point, 1/10, n/30 $20,000
b. 88,000 1,250 FOB destination, 2/10, n/30 9,000


Answer:
a.
$161,400. Purchase of $180,000 less return of $20,000 less the discount of $1,600 [($180,000 – $20,000) × 1%] plus $3,000 of shipping.

b.
$77,420. Purchase of $88,000 less return of $9,000 less the discount of $1,580 [($88,000 – $9,000) × 2%].