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During 2020, which was the first year of operations, Vaughn Manufacturing had merchandise purchases of $984000 before cash discounts. All purchases were made on terms

During 2020, which was the first year of operations, Vaughn Manufacturing had merchandise purchases of $984000 before cash discounts. All purchases were made on terms of 3/10, n/30. Three-fourths of the items purchased were paid for within 10 days of purchase. All of the goods available had been sold at year end. Which of the following recording procedures would result in the highest cost of goods sold for 2020?

  1. Recording purchases at gross amounts
  2. Recording purchases at net amounts, with the amount of discounts not taken shown under "other expenses" in the income statement

a) 1

b) 2

c) Either 1 or 2 will result in the same cost of goods sold.

d) Cannot be determined from the information provided.

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