At the beginning of Year 2, the Redd Company had the following balances in its a

Question

At the beginning of Year 2, the Redd Company had the following balances in its accounts:

During Year 2, the company experienced the following events:

1. Purchased inventory that cost $5,800 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $530 were paid in cash.

2. Returned $300 of the inventory it had purchased because the inventory was damaged in transit. The seller agreed to pay the return freight cost.

3. Paid the amount due on its account payable to Ross Company within the cash discount period.

4. Sold inventory that had cost $6,300 for $9,300 on account, under terms 2/10, n/45.

5. Received merchandise returned from a customer. The merchandise originally cost $530 and was sold to the customer for $830 cash. The customer was paid $830 cash for the returned merchandise.

6. Delivered goods FOB destination in Event 4. Freight costs of $630 were paid in cash.

7. Collected the amount due on the account receivable within the discount period.

8. Took a physical count indicating that $2,000 of inventory was on hand at the end of the accounting period.

Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, NC for net change in cash and NA to indicate the element is not affected by the event. The first event is recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.)

Cash $ 8,300 Inventory 2,300 Common stock 7,800 Retained earnings 2,800 Answer is not complete REDD COMPANY Horizontal Statements Model Year 2 Balance Sheet Income Statement Statement of Cash Flows Assets Stockholders' Equity - Liabilities+ Accounts Payable Event Net Revenue Expenses |= Accounts Receivable Merchandise Inventor Retained Cash +Common Stock 2.300 7.800 + Bal. 1a 1b. 8.300 2.800 5.800 (530)+ 53001, 1530)-(530°OAO (300) NA (5,610)X OA NA 3. (5,380) (5,500)+ 110 9.300 9.300 9.300 (6.300) 6.300 (6.300) 4b 5a 5b (830)+ (830) (830)790) OA 530 530) 530 (830)(830OA (9,300) (186)9 860 e 114 Oloa (30) x 2.000- 30 (30) OA 10034 + 7,800 2,800 8,580 S 7,146 S 1,434 1,554

Explanation / Answer

REDD COMPANY Horizontal Statements Model - Year 2 Event Balance Sheet Income Statement Statement of Cash Flows Assets = Liabilities + Stockholders' Equity Revenue - Expenses = Net Income Cash + Accounts Receivable + Merchandise Inventory = Accounts Payable + Common Stock + Retained Earnings Bal. 8300 + + 2300 = + 7800 + 2800 - = NA 1a. + + 5800 = 5800 + + - = NA 1b. -530 + + 530 = + + - = -530 OA 2 + + -300 = -300 + + - = NA 3 -5390 + + -110 = -5500 + + - = -5390 OA 4a. + 9300 + = + + 9300 9300 - = 9300 NA 4b. + + -6300 = + + -6300 - 6300 = -6300 NA 5a. -830 + + = + + -830 -830 - = -830 -830 OA 5b. + + 530 = + + 530 - -530 = 530 NA 6 -630 + + = + + -630 - 630 = -630 -630 OA 7 9114 + -9300 + = + + -186 -186 - = -186 9114 OA 8 + + -450 = + + -450 - 450 = -450 NA Bal. 10034 + 0 + 2000 = 0 + 7800 + 4234 8284 - 6850 = 1434 1734 NC

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