Question

Morris Company purchased goods with the following terms and details:

Sales price, $7,000
Terms, 5/10, n/30
Date of sale, August 9
Date of payment, August 20
Returns and allowances (before payment), $1,000
Shipping, FOB Shipping Point, $290, prepaid by seller

Required:

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

Answer 1

Answer: $6,290

Calculations:

Purchase price	$7,000
Returns and allowances	($1,000)
Shipping Cost	$290
Total due	$6,290

Thus, the amount that Morris Company has to pay to the seller for the goods is $6,290.

Note: 5% discount not applied because Morris company paid after 10 days.