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On May 10, 2020, C sold merchandise to D for P130,000 under the terms: less: 5%; 2/10, n/30 FOB destination freight collect
On May 10, 2020, C sold merchandise to D for P130,000 under the terms: less: 5%; 2/10, n/30 FOB destination freight collect. D paid the freight of P5,000. On April 15, D returned to C defective merchandise worth P10,000 (stated at list). D paid the account within the discount period amounting to P106,230. C notify. D that the amount that they should pay is P106,720. Whose claim do you think is correct C or D? Explain
Expert Solution
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| Company C and D | |
| C's claim is correct. Please find calculation below. | |
| Calculation as per C | Amount $ |
| Value of merchandise sold | 130,000.00 |
| Less: Goods returned | 10,000.00 |
| Net Value of merchandise sold | 120,000.00 |
| Less: Trade Discount at 5% | 6,000.00 |
| Net Value of merchandise sold | 114,000.00 |
| Less: Cash Discount at 2% | 2,280.00 |
| Amount Receivable | 111,720.00 |
| Less: Freight paid | 5,000.00 |
| Net amount Receivable | 106,720.00 |
| Explanation: Under FOB destination purchases freight cost is borne by seller. If it is paid by the buyer then it will be deducted from the net amount due. So D's calculation is incorrect. |
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