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Nelson Company bought inventory for $42,000 on terms of 2/15, n/60. It pays for the first $31,500 of inventory purchased within the discount period and
Nelson Company bought inventory for $42,000 on terms of 2/15, n/60. It pays for the first $31,500 of inventory purchased within the discount period and pays for the remaining $10,500 two months later.
1. | Prepare the journal entries to record the purchase and the payment under both the (a) gross price and (b) net price methods. Assume that Nelson uses the periodic inventory system. |
2. | Next Level Which of the two methods yields a conceptually preferable valuation of inventory? |
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