5. Some of the transactions of Yarrow Company during August are listed below. Yarrow uses the periodic inventory method. Aug Purchased merchandise on account, $12,000, terms 2/10, n/30. 10 13 Returned part of the purchase of August 10, $1,200, and received credit on account. 15 Purchased merchandise on account, $16,000, terms 1/10, n/60. 25 Purchased merchandise on account, $20,000, terms 2/10, n/30. 28 Paid invoice of August 15 in full. Required: (a) Assuming that purchases are recorded at gross amounts and that discounts are to be recorded when taken: - 1. Prepare general journal entries to record the transactions. - 2. Describe how the various items would be shown in the nancial statements. (b) Assuming that purchases are recorded at net amounts and that discounts lost are treated as nancial expenses: - 1. Prepare general journal entries to enter the transactions. - 2. Prepare the adjusting entry necessary on August 31 if nancial statements are to be prepared at that time. - 3. Describe how the various items would be shown in the nancial statements. (c) Which of the two methods do you prefer and why