Question

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. If required, round the answers to the nearest dollar.

	Merchandise		Freight Paid by Seller		Freight Terms		Returns and Allowances
a.	$7,900		$400			FOB shipping point, 2/10, n/30	$1,300
b.	4,300		400			FOB destination, 1/10, n/30	700

a.
b.

Answer 1

A. FOB Shipping point

Under this, the freight is to be paid by the buyer.

A	Gross Purchase	$7900
B	Purchase return & Allowances	$1300
C = A - B	Net Purchase	$6600
D = C x 2%	Discount availed	$132
E = C - D	Payment for purchase	$6468
F	Freight to be borne by buyer	$400
G = E + F	Total payment made	$6068

• B) FOB destination

A	Gross Purchase	$4300
B	Purchase return & Allowances	$700
C = A - B	Net Purchase	$3600
D = C x 1%	Discount availed	$36
E = C - D	Payment for purchase	$3564
F	Freight to be borne by buyer	$0
G = E + F	Total payment made	$3564