Question

Expert Computers was started in 2018. The company experienced the following accounting events during its first year of operation:
1. Started business when it acquired $86,000 cash from the issue of common stock
2. Purchased merchandise with a list price of $70,000 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 $56,900. Credit terms were 1/20, n/30
5. The merchandise had cost Expert Computers $34,100
6. Collected cash from the account receivable within the discount period
7. Paid $10,200 cash for operating expenses
8. Paid the balance due on accounts payable. The payment was not made within the discount period.

Record the events in a horizontal statements model

Answer 1

Answer:

The events have been explained below while the Horizontal Statement is attached for Expert Computers as of 2018.

Explanation:

Expert Computers

Horizontal statements model

For the year ending 2018

2. It means that if Expert Computers opt to pay for merchandise inventory within 10 days than they can avail the discount of 2%, otherwise they will be paying net amount in 30 days.

3. A/C Payable Balance = $70,000

Paid 1 Half = $70,000 x 1/2 = $35,000

Discount = $35,000 x 2% = $700

Cash Decrease by = $35,000 - $700 = $34,300

4. It means that if the buyer pays the amount within 20 days of the purchase than Expert Computers will give 1% discount, otherwise full amount needs to be paid within 30 days.

5. This is the cost of goods sold.

6. Account Receivables = $56,900

Discount Allowed = $56,900 x 1% = $569

Cash = $56,900 - $569 = $56,331

8. Since the discount is not availed as payment to vendor made within 30 days. Hence, the remaining amount of current liability will balance out with $35,000.