Question

On March 30, Century Television received an invoice dated March 28 from ACME Manufacturing for 43 televisions at a cost of $125 each. Century received a 13/4/4 chain discount. Shipping terms were FOB shipping point. ACME prepaid the $95 freight. Terms were 2/10 EOM. When Century received the goods, 3 sets were defective. Century returned these sets to ACME. On April 08, Century sent a $170 partial payment. Century will pay the balance on May 06. What is Century’s final payment on May 06? Assume no taxes. (Do not round intermediate calculations. Round your answer to the nearest cent.)

Answer 1

Solution

Net purchased units = Total Units - Defected units

= 43 - 3

= 40 Units

Total List price for 40 units = 40 unit * $125 = $5000

Net Price after chain discount 13/4/4 = $5000 * 87% * 96% * 96%

= $4008.96

Since, payment on 8th april was paid within 10 days of receiving of goods (30 Mar), therefore 2% discount will be applicable for partial payment of $170.

Therefore, Cash Discount = $170 * 2% = $3.40

Since, Shipping terms were FOB shipping point. That means buyer has to pay for the shipping charges but they were prepaid by the seller. So, buyer has to pay back these charges to seller.

Now, the final payment amount on 6th May would be:

Net Price after chain discount	$4008.96
Less: Partial Payment	($170)
Less: Cash Discount	($3.40)
Add: Freight	$95
	$3,930.56