Vincent Company, Inc

Essay

Vincent Company, Inc. 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, Inc. paid within the discount period. Assume that both buyer and seller use the gross method of accounting for purchases and sales and a perpetual inventory system.
1. Prepare entries that Vincent should record for (a) the purchase and (b) the cash payment.
2. Prepare entries that Liu should record for (a) the sale and (b) the cash collection.