• Vincent Company purchased merchandise from Liu Company with an invoice price of $300,000 and credit terms of 2/10, n/30. Liu Company's cost for the merchandise was $200,000. Vincent Company paid within the discount period. Assume that both buyer and seller use a perpetual inventory system.
• Prepare entries that Vincent should record for (a) the purchase and (b) the cash payment.
• Prepare entries that Liu should record for (a) the sale and (b) the cash collection.
• 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 9% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Assume a 365-day year and round dollar amounts to the nearest cent.)