Question

Lee Company purchased goods from Kelly with the following terms and details. Sales price, $6,000 Terms, (4/10, n/30) Date of sale, January 1 Date of payment, January 14 Shipping, FOB Destination, $115, prepaid by seller Determine if Lee, the buyer, qualifies for a cash discount, and who pays for shipping, Lee or Kelly.

Answer 1

the question is not very clear about when the goods arrived at Lee Company. The discount term starts to count as soon as the goods are delivered since this is a FOB destination sale (title passes only after goods are delivered to the buyer's warehouse).

Assuming that the goods were delivered the same day as they were shipped, January 1, the discount period ends January 11. Since the payment was done on January 14, there is no cash discount.

Since this is a FOB destination sale, the freight charges are paid by the seller (Kelly).