Banana company acquired a machinery for P500,000. The credit terms were 2/10, n/30.

Required:

1. Prepare two journal entries, one for the acquisition and the other for the subsequent payment using gross method assuming :

a. Payment was made within the discount period

b. Payment was made beyond the discount period.

2. Compute for the amount to be capitalized (initial measurement) of the machinery under the following independent assumption:

a. Payment was made within the discount period

b. Payment was made beyond the discount period.