Exercise 4-7 Analyzing and recording merchandise transactions-both buyer and seller LO P1, P2 Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $16,000 and credit terms of 2/10, n/60. The merchandise had cost Mesa $10,912. Santa Fe paid within the discount period. Assume that both buyer and seller use a perpetual inventory system. 1. Prepare the entries that Santa Fe should record for the above transactions. Answer is complete and correct. No Transaction General Journal Debit Credit 16,000 Merchandise inventory Accounts payable 16,000 Accounts payable 16,000 2 Merchandise inventory Cash 320 15,680 2. Prepare the entries that Mesa should record for the above transactions Answer is complete but not entirely correct Transaction General Journal Debit Credit Accounts payable 16,000 Sales 16,000 Cost of goods sold 10,912 Merchandise inventory 10,912 15,8603 320 3 Cash Sales discounts Accounts receivable 16,000 3. Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 8% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Use 365 days a year. Do not round intermediate calculations.) Answer is complete and correct. Savings from discount ake $ 320 Answer is complete but not entirely correct. Interest Expense on Funds Borrowed Amount borrowed Number of days of $ 15,860 50 174 interest Interest expense Buyer's net savings180