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.
Merchandise Freight Paid Freight Terms Returns and Allowances
(Invoice Amount) by Seller (Invoice Amount)
a. $5,100 $200 FOB destination,
1/10, n/30 $1,700
b. 3,250 400 FOB shipping point,
2/10, n/30 1,000

A. $3,566

B. $2,605

Explanation:

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

A. Amount paid in full=(5,100-1,700)*(100%-1%)+200

Amount paid in full=(5,100-1,700)*99%+200

Amount paid in full=3,400*99%+200

Amount paid in full=$3,566

B. Amount paid in full=(3,250-1,000)*(100%-2%) +400

Amount paid in full=(3,250-1,000)*98% +400

Amount paid in full=2,250*98%+400

Amount paid in full=$2,605

Therefore the amount to be paid in full settlement of each of two invoices, (a) and (b) will be :

A. $3,566

B. $2,605

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