Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of $27,400 and credit terms of 2110, n/60

Santa Fe Company purchased merchandise for resale from Mesa Company with an invoice price of
$27,400 and credit terms of 2110, n/60. The merchandise had cost Mesa $18,687. Santa Fe paid within
the discount period. Assume that both buyer and seller use a perpetual inventory system.
1(a)Prepare entries that the buyer should record for the purchase.

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. Round your
intermediate calculations and final answer to 2 decimal places.)