Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. The seller paid freight costs of $2,000 and issued a credit memo for $10,000 prior to payment. What is the amount of the cash discount allowable?

Question

Quizplus · Accepted Answer

FOB shipping point means the buyer is responsible for paying the freight costs, making the freight costs paid by the seller irrelevant in calculating the cash discount.

Net amount due = $25,000 - $10,000 = $15,000

Discount = 1% x $15,000 = $150.

Merchandise Subject to Terms 1/10, N/30, FOB Shipping Point, Is