Otto Corp. purchased merchandise during 2010 on credit for $300000; terms 2/10

Otto Corp. purchased merchandise during 2010 on credit for $300000; terms 2/10 n/30. All of the gross liability except $60000 was paid within the discount
period. The remainder was paid within the 30-day term. At the end of the annual accounting period December 31 2010 90% of the merchandise had been sold and
10% remained in inventory. The company uses a periodic system.

Instructions

(a) Assuming that the net method is used for recording purchases prepare the entries for the purchase and two subsequent payments.

(b) What dollar amounts should be reported for the final inventory and cost of goods sold under the (1) net method; (2) gross method? Assume that there was no
beginning inventory.