Question
Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $16,600 and credit terms of 3/10, n/60. The merchandise had
Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $16,600 and credit terms of 3/10, n/60. The merchandise had cost Mesa $11,321. 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. |
2. | Prepare the entries that Mesa should record for the above transactions. |
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.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started