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FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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### Educational Content: Freight Terms and Invoice Settlement #### Problem Statement Determine the amount to be paid in full settlement of each of the two invoices (a) and (b). Assume that credit for returns and allowances was received prior to payment, and that the invoices were paid within the discount period. Round the answers to the nearest dollar. #### Invoice Details: 1. **Merchandise Costs:** - Invoice (a): $5,700 - Invoice (b): $4,050 2. **Freight Paid By Seller:** - $100 #### Freight Terms: 1. **Invoice (a):** - FOB Shipping Point: $1,700, 1/10, n/30 2. **Invoice (b):** - FOB Destination: 2/10, n/30 3. **Returns and Allowances:** - Invoice (a): $700 - Invoice (b): $300 #### Steps to Determine Settlement Amount: For each invoice, adjust for returns and allowances, apply any discounts available under the terms, and include freight costs where applicable. ##### Invoice (a) Calculation: 1. **Adjust for Returns and Allowances:** - Initial Merchandise: $5,700 - Less Returns and Allowances: $700 - Adjusted Merchandise: $5,000 2. **Apply Discounts:** - Discount Rate: 1% (1/10 net 30) - Discount Amount: $5,000 x 1% = $50 - Amount After Discount: $5,000 - $50 = $4,950 3. **Add Freight Costs:** - Freight Cost: $1,700 - Total Settlement for Invoice (a): $4,950 + $1,700 = $6,650 ##### Invoice (b) Calculation: 1. **Adjust for Returns and Allowances:** - Initial Merchandise: $4,050 - Less Returns and Allowances: $300 - Adjusted Merchandise: $3,750 2. **Apply Discounts:** - Discount Rate: 2% (2/10 net 30) - Discount Amount: $3,750 x 2% = $75 - Amount After Discount: $3,750 - $75 = $3,675 3. **Include Freight Costs (if applicable
Transcribed Image Text:### Educational Content: Freight Terms and Invoice Settlement #### Problem Statement Determine the amount to be paid in full settlement of each of the two invoices (a) and (b). Assume that credit for returns and allowances was received prior to payment, and that the invoices were paid within the discount period. Round the answers to the nearest dollar. #### Invoice Details: 1. **Merchandise Costs:** - Invoice (a): $5,700 - Invoice (b): $4,050 2. **Freight Paid By Seller:** - $100 #### Freight Terms: 1. **Invoice (a):** - FOB Shipping Point: $1,700, 1/10, n/30 2. **Invoice (b):** - FOB Destination: 2/10, n/30 3. **Returns and Allowances:** - Invoice (a): $700 - Invoice (b): $300 #### Steps to Determine Settlement Amount: For each invoice, adjust for returns and allowances, apply any discounts available under the terms, and include freight costs where applicable. ##### Invoice (a) Calculation: 1. **Adjust for Returns and Allowances:** - Initial Merchandise: $5,700 - Less Returns and Allowances: $700 - Adjusted Merchandise: $5,000 2. **Apply Discounts:** - Discount Rate: 1% (1/10 net 30) - Discount Amount: $5,000 x 1% = $50 - Amount After Discount: $5,000 - $50 = $4,950 3. **Add Freight Costs:** - Freight Cost: $1,700 - Total Settlement for Invoice (a): $4,950 + $1,700 = $6,650 ##### Invoice (b) Calculation: 1. **Adjust for Returns and Allowances:** - Initial Merchandise: $4,050 - Less Returns and Allowances: $300 - Adjusted Merchandise: $3,750 2. **Apply Discounts:** - Discount Rate: 2% (2/10 net 30) - Discount Amount: $3,750 x 2% = $75 - Amount After Discount: $3,750 - $75 = $3,675 3. **Include Freight Costs (if applicable
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