Schrand Corporation purchases materials from a supplier that offers credit terms of 2/ I 5, n/60. It purchased $12,500 of merchandise inventory from that supplier on January20, 2019.

a. Assume that Schrand Corporation paid the invoice on February15, 2019. Prepare journal entries to record the purchase of this inventory and the cash payment to the supplier using the net-of-discount method.

b. Set up the necessary T-accounts and post the journal entries from question a to the accounts.

c. Compute the cost of a lost discount as an annual percentage rate.