Question

Jordan’s of Boston sold Lee Company of New York computer equipment with a $7,000 list price. Sale terms were 4/10, n/30 FOB Boston. Jordan’s agreed to prepay the $400 freight. Lee pays the invoice within the discount period. What does Lee pay Jordan’s? 

Answer 1

Equipment List Price = $7,000

Jordon's agreed to prepay the $400 Freight as the sales terms are FOB shipping point .

Therefore , Invoice value of equipment = $7,000 + $400

                                                               = $7,400

Lee pays within discount period i.e., 4/10,n/30.

Discount will be only on price and not Freight charges .

Discount = $7,000 x $4% = 280

The amount Lee pays to Jordan is

                                        = $7400 - $280

                                         = $7,120.

The amount Lee pays to Jordan is $7,120.