Discounts
Response to the following problem:
On April 11, Edwards Construction Company purchased inventory for $20,000 on terms of 2/10, n/30. It pays the account balance on April 21.
Required
1. Prepare the journal entries to record the purchase and payment using each of the following methods: (a) gross price, (b) net price.
2. If the company sold half the inventory during April for $12,000, how much income would it recognize under each method?
3. Assume that the invoice was misfiled and, as a result, the company did not pay until April 30.
Prepare the journal entries to record the purchase and payment under each of the methods. If the company sold half the inventory during April for $12,000, how much income would it recognize under each method?