Freight TermsDetermine 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(Invoice Amount)FreightPaid by SellerFreight TermsReturns andAllowances(InvoiceAmount)a.$24,000 $300 FOB destination, 1/10, n/30$2,000 b.31,500 250 FOB shipping point, 2/10, n/302,500 a.$b.$ Feedback a & b. Under FOB shipping point, freight is paid by the buyer, while under FOB destination freight is the seller's expense. To determine the amount, first deduct the return before calculating the discount. Then calculate (Purchase – Return – Discount) + applicable freight.

Answered: Determine the amount to be paid in full…

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter5: Accounting For Merchandising Businesses

Section: Chapter Questions

Problem 5.4BE

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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 (Invoice Amount)	Freight Paid by Seller	Freight Terms	Returns and Allowances (Invoice Amount)
a.	$24,000		$300		FOB destination, 1/10, n/30	$2,000
b.	31,500		250		FOB shipping point, 2/10, n/30	2,500

a.	$
b.	$

Feedback

a & b. Under FOB shipping point, freight is paid by the buyer, while under FOB destination freight is the seller's expense. To determine the amount, first deduct the return before calculating the discount. Then calculate (Purchase – Return – Discount) + applicable freight.

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