Question

Richardson Company purchased goods with the following terms and details:

Sales price, $8,000
Terms, 4/10, n/30
Date of sale, October 9
Date of payment, October 19
Returns and allowances (before payment), $600
Shipping, FOB Destination, $305, prepaid by seller

Required:

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

Answer 1

Answer

Using perpetual system, the journal entry would be as follows: Debit Credit $8,000 Invento Accounts Payable To record Purchase) $8,000 $600 Accounts Payable Invento (Returns and allowances) $600 A 4% discount was given on the $7,400 bill-($ 8,000 purchased-$6,000 returned) ] because of payment within the 10-day discount period (payment terms were 4/10, n/30 Accounts Payable Invento Cash $7,400 $296 $7,104 FOB destination-The seller No entry in books of purchaser s the freight charges and owns the goods while they are in transit Hence, the amount that Richardson Company has to pay to the seller for the goods is $7,104