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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 5, Problem 4BE
Textbook Problem
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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.

(a)

To determine

Calculate the amount to be paid in full settlement for the invoice amount of $24,000.

Explanation of Solution

Transportation Costs: The costs of delivering the merchandise inventory from the manufacturer to the buyer are termed as transportation cost and are differentiated on the basis of terms of the payment of transportation charges or freight by the buyer or the seller.

FOB (Free on Board) Destination means that the buyer pays all costs incurred for the delivery of goods once the goods is delivered at buyer receiving point. The transportation costs from the point of origin to the point of destination is beard by the seller.

Calculate the amount to be paid in full settlement under the terms of FOB destination, 1/10, n/30.

Merchandise purchased = $24,000

Freight charges = $300

Discount percentage = 1% (Term 1/10, n/30)

Returns and allowances = $2,000

Amount to be paidin full settlement] = [Netmerchandise purchased on accountDiscount]=[

(b)

To determine

Calculate the amount to be paid in full settlement for the invoice amount of $31,500.

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Chapter 5 Solutions

Financial And Managerial Accounting
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