4. Accounting for purchase discounts. Otto Corp. purchased merchandise during 2014 on credit for $500,000; terms 2/10, n/30. All of the gross liability except $80,000 was paid within the discount period. The remainder was paid within the 30-day term. At the end of the annual accounting period, December 31, 2014, 90% of the merchandise had been sold and 10% remained in inventory. The company uses a periodic system. Instructions (a) Assuming that the net method is used for recording purchases, prepare the entries for the purchase and two subsequent payments.