Question

Powell Company purchased goods with the following terms and details:

Sales price, $8,000
Terms, 4/10, n/30
Date of sale, December 9
Date of payment, December 19
Returns and allowances (before payment), $400
Shipping, FOB Shipping Point, $140, prepaid by seller

Required:

Compute the amount that Powell Company has to pay to the seller for the goods.

Answer 1

Sales price, $8,000
Terms, 4/10, n/30
Date of sale, December 9
Date of payment, December 19

Returns and allowances (before payment), $400
Shipping, FOB Shipping Point, $140

Final amount due = Sales - Sales returns

= 8,000-400

= $7,600

Sales discount = Final amount due x Discount percentage

= 7,600 x 4%

= $304

Amount that Powell company has to pay to the seller = Sale price - Sales returns - Sales discount + Shipping expense

= 8,000-400-304+140

= $7,436

In case of FOB shipping, shipping charges are paid by the buyer.

Kindly comment if you need further assistance. Thanks‼!