Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $24,000 and credit terms of 3/10, n/60. The merchandise had cost Mesa $16,000. Santa Fe paid within the discount period. Assume that both buyer and seller use a perpetual inventory system.

1(a)
Prepare entries that the buyer should record for the purchase.



1(b)
Prepare entries that the buyer should record for the cash payment.



2(a)
Prepare entries that the seller should record for the sale.



2(b)
Prepare entries that the seller should record for the cash collection.


3.
Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 8% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Round your final answer to the nearest whole dollar amount. Use 365 days a year.)

Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $24,000 and credit terms of 3/10, n/60. The merchandise had cost Mesa $16,000. Santa Fe paid within the discount period. Assume that both buyer and seller use a perpetual inventory system.

1(a)
Prepare entries that the buyer should record for the purchase.
Debit Merchandise Inventory 24,000
Credit Accounts payable 24,000


1(b)
Prepare entries that the buyer should record for the cash payment.



2(a)
Prepare entries that the seller should record for the sale.
Debit Accounts receivable 24,000
Credit Sales 24,000

Debit Cost of goods sold 16,000
Credit Merchandise Inventory 16,000


2(b)
Prepare entries that the seller should record for the cash collection.
Debit Cash 23,280
Debit Sales Discount 720
Credit Accounts receivable 24,000
3.
Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 8% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Round your final answer to the nearest whole dollar amount. Use 365 days a year.)

Interest on 24,000 @ 8% for 20 days = 105
Discount received 720
Saving 605