Digital Sales was started in 2011. The company experienced the following accounting events during its first year

Question:

Digital Sales was started in 2011. The company experienced the following accounting events during its first year of operation.

1. Started business when it acquired $80,000 cash from the issue of common stock.

2. Purchased merchandise with a list price of $64,000 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 that had a list price of $52,000. Credit terms were 1/20, n/30. The merchandise had cost Digital $31,000.

5. Collected cash from the account receivable within the discount period.

6. Paid $9,600 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 like the following one.

b. What is the amount of gross margin for the period? What is the net income for the period?
c. Why would Digital Sales sell merchandise with the terms 1/20, n/30?
d. What do the terms 2/10, n/30 in Event 2 mean to DigitalSales?

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...