Question

Determine the amount to be paid in full settlement of each of two invoices, (a) and...

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
(Invoice Amount)		 Freight
Paid by Seller		 Freight Terms Returns and
Allowances
(Invoice
Amount)
a. $7,600 $100 FOB destination, 1/10, n/30 $1,600
b. 3,400 100 FOB shipping point, 2/10, n/30 750
a. $_______
b. $_______
Business   Accounting   
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Homework Answers

Answer #1

Freight terms: In case of destination freight paid by seller is not added to cost

In case of shipping point freight paid by seller is added to cost

Computation of amount to be paid in full settlement.

a) [(Invoice amount - returns and allowances) * (1 - discount rate)]

[($7,600 - $1,600) * (1 - 0.01)] = $5,940

b) [(Invoice amount - returns and allowances) * (1 - discount rate)] + Freight paid

[($3,400 - $$750) * (1 - 0.02)] + $100 = $2,697

Answers.

a) $5,940

b) $2,697

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