PE 6-4B Freight terms

Determine the amount to be paid in full settlement of each of 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.

                                       Freight                                                             Returns and
           Merchandise      Paid by Seller               Freight Terms                   Allowances
a.            $20,000               $500            FOB destination, 1/10, n/30             $2,000
b.              18,000                250          FOB shipping point, 2/10, n/30            1,000

Answer:
a. $17,820. Purchase of $20,000 less return of $2,000 less the discount of $180 [($20,000 – $2,000) × 1%].
b. $16,910. Purchase of $18,000 less return of $1,000 less the discount of $340 [($18,000 – $1,000) × 2%] plus $250 of shipping.