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During 2012, which was the first year of operations, Oswald
Company had merchandise purchases of $985,000 before cash
discounts. All purchases were made on terms of 2/10, n/30. Three-
fourths of the items purchased were paid for within 10 days of
purchase. All of the goods available had been sold at year end.
56. Which of the following recording procedures would result in
the highest cost of goods sold for 2012?
1. Recording purchases at gross amounts
2. Recording purchases at net amounts, with the amount of discounts
not taken shown under "other expenses" in the income statement
a. 1
b. 2
c. Either 1 or 2 will result in the same cost of goods sold.
d. Cannot be determined from the information provided.
57. Which of the following recording procedures would result in
the highest net income for 2012?
1. Recording purchases at gross amounts
2. Recording purchases at net amounts, with the amount of discounts
not taken shown under "other expenses" in the income statement
a. 1
b. 2