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. $ 90,000 $1,000 FOB shipping point, 1/10, n/30 $15,000
b. 110,000 1,575 FOB destination, 2/10, n/30 8,500


Answer:
a. $75,250. Purchase of $89,100 [$90,000 – ($90,000 × 1%)] less return of $14,850 [($15,000 – ($15,000 × 1%)] plus $1,000 of shipping.


b. $99,470. Purchase of $107,800 [$110,000 – ($110,000 × 2%)] less return of $8,330 [$8,500 – ($8,500 × 2%)].