Exercise 3-6A (Algo) Purchase discounts and purchase returns LO 3-2, 3-3
On April 6, Home Furnishings purchased $41,000 of merchandise from Una's Imports, terms 3/10, n/45. On April 8, Home Furnishings returned $8,600 of the merchandise to Una's Imports for credit. Home Furnishings paid cash for the merchandise on April 15.
Required:
a. What is the amount that Home Furnishings must pay Una's 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).
HOME FURNISHINGS
Effect of Events on the Financial Statements
Balance Sheet
Income Statement
