on april 6, home furnishings purchased $35,000 of merchandise from unas imports, terms 3/10, n/45. on april…
on april 6, home furnishings purchased $35,000 of merchandise from unas imports, terms 3/10, n/45. on april 8, home furnishings returned $7,400 of the merchandise to unas imports for credit. home furnishings paid cash for the merchandise on april 15. required: a. what is the amount that home furnishings must pay unas imports on april 15? b. use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. more specifically, record the amounts of the events into the model. also, in the statement of cash flows column, classify the cash flows as operating activities (oa), investing activities (ia), or financing activities (fa). c. how much must home furnishings pay for the merchandise purchased if the payment is not made until april 20? d. record the payment for the merchandise in requirement (c) in the horizontal financial statements model. also, in the statement of cash flows column, classify the cash flows as operating activities (oa), investing activities (ia), or financing activities (fa). complete this question by entering your answers in the tabs below. required a required b required c required d what is the amount that home furnishings must pay unas imports on april 15? net amount due
Answer
Explanation:
Step1: Calculate net purchase amount
The initial purchase was $35,000 and the return was $7,400. So the net - purchase amount before discount is $35000 - 7400=27600$.
Step2: Determine if discount applies
The terms are 3/10, n/45, which means a 3% discount if paid within 10 days. April 6 to April 15 is within 10 days.
Step3: Calculate amount to pay on April 15
The amount to pay is the net - purchase amount minus the discount. The discount is 3% of 27600, so the amount to pay is $27600\times(1 - 0.03)=27600\times0.97 = 26772$.
Step4: Answer for part c
If paid on April 20 (after the 10 - day discount period), no discount applies. So the amount to pay is the net - purchase amount of $27600$.
Answer:
a. $26772 c. $27600
For part b and d, creating a horizontal financial statements model is best done in a tabular format. Here is a general description of how the events affect the statements:
For part b - Initial purchase on April 6:
- Balance Sheet: Inventory (asset) increases by $35,000$, Accounts Payable (liability) increases by $35,000$.
- Income Statement: No effect yet.
- Cash Flow Statement: No cash flow yet.
Return on April 8:
- Balance Sheet: Inventory (asset) decreases by $7,400$, Accounts Payable (liability) decreases by $7,400$.
- Income Statement: No effect yet.
- Cash Flow Statement: No cash flow yet.
Payment on April 15:
- Balance Sheet: Cash (asset) decreases by $26772$, Accounts Payable (liability) decreases by $26772$.
- Income Statement: Purchase Discounts (a contra - expense) increases by $828$ (3% of $27600$), reducing the cost of goods sold (eventually).
- Cash Flow Statement: Operating Activities (OA) - cash outflow of $26772$.
For part d - Payment on April 20:
- Balance Sheet: Cash (asset) decreases by $27600$, Accounts Payable (liability) decreases by $27600$.
- Income Statement: No discount, so no effect on income statement related to discount.
- Cash Flow Statement: Operating Activities (OA) - cash outflow of $27600$.