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 $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. What is the amount of gross margin for the period?
b. What is the net income for the period?

Answer 1

Answer:

Gross profit              11,720

Net income             9,620

Explanation:

We first, solve for the net sales:

Sales revevenue     28,000

Sales discount  1% =    (280)

Net sales                   27,720

Now we subtract the cost of good sold, which is given:

Cost of Goods Sold (16,000)

Gross profit              11,720

Now, from the gross profit we subtract the other operating expenses:

Operating expenses  (2,100)

Net income                  9,620