Clayton Computers was started in 2014. The company experiencedthe following accounting events during its first year ofoperation.
1. Started business when it acquired $25,000 cash from the issueof common stock.
2. Purchased merchandise with a list price of $23,000 onaccount, terms 2/10, n/30.
3. Paid off one-half of the accounts payable balance within thediscount period.
4. Sold merchandise on account that had a list price of $24,000.Credit terms were 1/20, n/30. The merchandise had cost ClaytonComputers $14,000.
5. Collected cash from the account receivable within thediscount period.
6. Paid $1,700 cash for operating expenses.
7. Paid the balance due on accounts payable. The payment was notmade within the discount period.
Questions:
A.) Record the events in a horizontal statements model below. Inthe Cash Flows column, use the letters OA to designate operatingactivity, IA for investing activity, FA for financing activity, NCfor net change in cash and NA to indicate accounts not affected bythe event. The first event is recorded as an example.
B.) What is the amount of gross margin for the period?
C.) What is the net income for the period?
Clayton Computers was started in 2014. The company experiencedthe following accounting events during its first year ofoperation.
1. Started business when it acquired $25,000 cash from the issueof common stock.
2. Purchased merchandise with a list price of $23,000 onaccount, terms 2/10, n/30.
3. Paid off one-half of the accounts payable balance within thediscount period.
4. Sold merchandise on account that had a list price of $24,000.Credit terms were 1/20, n/30. The merchandise had cost ClaytonComputers $14,000.
5. Collected cash from the account receivable within thediscount period.
6. Paid $1,700 cash for operating expenses.
7. Paid the balance due on accounts payable. The payment was notmade within the discount period.
Questions:
A.) Record the events in a horizontal statements model below. Inthe Cash Flows column, use the letters OA to designate operatingactivity, IA for investing activity, FA for financing activity, NCfor net change in cash and NA to indicate accounts not affected bythe event. The first event is recorded as an example.
B.) What is the amount of gross margin for the period?
C.) What is the net income for the period?
Related questions
At the beginning of 2013, the Bradley Company had the followingbalances in its accounts:
Cash $8,600
Inventory $2,600
Common Stock $8,100
Retained Earnings $3,100
| During 2014, thecompany experienced the following events: |
| 1. | Purchased inventory that cost $6,100 on account from BivinsCompany under terms 2/10, n/30. The merchandise was delivered FOBshipping point. Freight costs of $560 were paid in cash. |
| 2. | Returned $350 of the inventory that it had purchased because theinventory was damaged in transit. The seller agreed to pay thereturn freight cost. |
| 3. | Paid the amountdue on its account payable to Bivins Company within the cashdiscount period. |
| 4. | Sold inventorythat had cost $6,600 for $9,600 on account, under terms 2/10,n/45. |
| 5. | Received merchandise returned from a customer. The merchandiseoriginally cost $560 and was sold to the customer for $860 cash.The customer was paid $860 cash for the returned merchandise. |
| 6. | Delivered goodsFOB destination in Event 4. Freight costs of $660 were paid incash. |
| 7. | Collected theamount due on the account receivable within the discountperiod. |
| 8. | Took a physical count indicating that $2,300 of inventory was onhand at the end of the accounting period. Required: Record each event in a statements model like thefollowing one. In the Cash Flow column, use OA to designateoperating activity, IA for investment activity, FA for financingactivity, NC for net change in cash and NA to indicate the elementis not affected by the event. The first event is recorded as anexample. |
1.) X sold Y merchandise on account FOB shipping point, 3/10,net 30, for $10,000. X prepaid the $200 shipping charge. Using theperpetual inventory method, which of the following entries will Ymake if Y pays within the discount period?
Accounts Payable-X, debit $9,900; Cash, credit $9,900 | |
Accounts Payable-X, debit $10,000; Transportation In, credit$200; Cash, credit $9,800 |
Accounts Payable-X, debit $9,700; Merchandise Inventory, debit$200; Cash, credit $9,900 | |
Accounts Payable-X, debit $9,700; Transportation In, debit $200;Cash, credit $9,900 |
2.) Merchandise with an invoice price of $4,000 is purchasedsubject to terms of 2/10, n/30, FOB destination. Transportationcosts paid by the seller totaled $150. What is the cost of themerchandise, assuming the discount is taken?
$4,070 | |
$3,920 |
$4,067 | |
$4,150 |
3.) A sales invoice included the following information:merchandise price, $1,000; transportation, $200; terms 1/10, n/eom,FOB shipping point. Assuming that a credit for merchandise returnedof $300 is granted prior to payment, that the transportation isprepaid by the seller, and that the invoice is paid within thediscount period, what is the amount of cash received by theseller?
$693 | |
$893 |
$990 | |
$700 |
4.) X sold Y merchandise on account FOB shipping point, 2/10,net 30, for $10,000. X prepaid the $200 shipping charge. Which ofthe following entries does X make to record this sale?
Accounts Receivable debit $9,800; Sales credit $9,800; AccountsReceivable debit $200; Cash credit $200 | |
Accounts Receivable debit $10,400; Sales credit $10,400 |
Accounts Receivable debit $10,000; Sales credit $10,000 | |
Accounts Receivable debit $10,000; Sales credit $10,000;Transportation Out debit $200; Cash credit $200 |
