Question

Expert Computers was started in Year 1. The company experienced the following accounting events during its first year of operation 1. Started business when it acquired $40,000 cash from the issue of common stock 2. Purchased merchandise with a list price of $32,000 on account, terms 2/10,n/30. 3. Paid off one-half of the accounts payable balance within the discount period. 4. Sold merchandise on account for $28,000 Credit terms were 1/20, n/30. The merchandise had cost Expert Computers $16.000 5. Collected cash from the account receivable within the discount period. 6. Paid $2,100 cash for operating expenses. 7. Paid the balance due on accounts payable. The payment was not made within the discount period. Required a. Record the events in a horizontal statements model below. In the Cash Flows column, use the letters OA to designate operating activity, IA for investing activity, FA for financing activity, or NC for net change in cash. If the account is not affected by the event, leave the cell blank. The first event is recorded as an example. b. What is the amount of gross margin for the period? What is the net income for the period? Complete this question by entering your answers in the tabs below. Required A Required B Record the events in a horizontal statements model below. In the Cash Flows column, use the letters OA to designate operating activity, IA for inve event, leave the cell blank. The first event is recorded as an example. (Not every cell will require entry. Enter any decreases to account balances an EXPERT COMPUTERS Horizontal Statements Model for Year 1 Liabilities Stockholders' Equity Assets < Prev 2 of 4 !!! Next >

Answer 1

Event Cash + EXPERT COMPUTERS Horizental Statements Modeld for Year 1 Assets = Liabilities + Stockholders' Equity Income Statement Accounts Accounts Retained Statement of + Inventory = + Common Stock + Revenues Receivable Payable Expenses = Net Income Earnings Cash Flows + + $40,000 + $0 $40,000 FA + $32,000 = $32,000 + + $0 ($16,000) + + $320 $320 $320 ($15,680) OA $28,000 + ($16,000) + $12,000 $28,000 $16,000 $12,000 + + $0 ($28,000) + + ($280) $280 ($280) $27,720 OA + + ($2,100) $2,100 ($2,100) ($2,100) OA ($16,000) + $0 ($16,000) OA $0 + $16,000 $0 + $40,000 + $9,940 $28,320 $18,380 = $9,940 $33,940 + + 1 $40,000 + 2 + 3 ($15,680) + 4a + 4b + 5 $27,720 + 6 ($2,100) + 7 ($16,000) + Total $33,940 + - + + + + +

B.

Gross Margin Net Income $12,000 $9,940 Working Note: Income Statement Sales Revenue $28,000 Less: Cost of Goods Sold ($16,000) Gross Margin $12,000 Less: Operating expense ($2,100) Add: Discount Received $320 Less: Discount Allowed ($280) Net Income $9,940

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