Question

In credit terms of 1/10, n/30, the "1" represents the  

a.	number of days in the discount period
b.	full amount of the invoice
c.	number of days when the entire amount is due
d.	percent of the cash discount

Merchandise with a sales price of $500 is sold on account with term 2/10, n/30. The journal entry to record the sale would include a  

a.	debit to Cash for $500
b.	Debit to Sales Discounts for $10
c.	Credit to Sales for $500
d.	Debit to Accounts Receivable for $490

If the buyer is to pay the transportation costs of delivering merchandise, delivery terms are stated as  

a.	FOB shipping point
b.	FOB destination
c.	FOB n/30
d.	FOB buyer

.If the seller is to pay the transportation costs of delivering merchandise, the delivery terms are stated as  

a.	FOB shipping point
b.	FOB destination
c.	FOB n/30
d.	FOB seller

Merchandise with an invoice price of $4,000 is purchased on June 2 subject to terms of 2/10, n/30, FOB destination. Transportation costs paid by the seller totaled $150. What is the cost of the merchandise if paid on June 12, assuming the discount is taken?

a.	$4,150
b.	$4,070
c.	$4,067
d.	$3,920

Answer 1

credit terms of 1/10, n/30 means 1% discount will be given if payment is done within 10 days, otherwise no discount and payment has to be done within 30 days

hence, the answer is:

d.	percent of the cash discount

Sales will be credited with full amount, since discount is not known.

Hence, the answer is:

c.	Credit to Sales for $500

If the buyer is to pay the transportation costs of delivering merchandise,it means that the seller is responsible upto shipping point only.

a.	FOB shipping point

If the seller is to pay the transportation costs of delivering merchandise, Seller is responsible upto shipping point

a.	FOB shipping point

Discount amount = 4,000*2% = $80

Hence. Cost will be $4,000 - $80 +$150

= b. $4,070