EFFECTS OF DISCOUNTS ON SALES AND PURCHASES

Smithson Products sells shoes and accessories to retail stores. Gross sales in 2009 were $1,500,250 (Smithson’s list price) on terms 2/10, n/30. Customers paid for $925,500 (Smithson’s list price) of the merchandise within the discount period and the remaining $574,750 after the end of the discount period. Smithson records purchases and sales using the gross method to account for sales discounts.