At tne peginning or zuto, tne keaa Lompany naa tne tollowing paiances in its acc

Question

At tne peginning or zuto, tne keaa Lompany naa tne tollowing paiances in its accounts: Cash Inventory Common stock Retained earnings $8,700 2,780 8,280 3,200 During 2018, the company experienced the following events: 1. Purchased inventory that cost $6,200 on account from Redd Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $570 were paid in cash. 2 Returned $300 of the inventory that 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 Redd Company within the cash discount period. 4. Sold inventory that had cost $6,700 for $9,700 on account, under terms 2/10, n/45. 5. Recelved merchandise returned from a customer. The merchandise originally cost $570 and was sold to the customer for $870 cash. The customer was paid $870 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $670 were paid in cash. 7. Collected the amount due on the account receivable within the discount period 8. Took a physical count indicating that $2.400 of inventory was on hand at the end of the accounting period equired . Identify these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). (Select "NA" if there is no effect on the "Classification") Event Classification

Explanation / Answer

REDD COMPANY Effects of Events on the Financial Statements for 2018 Event No: Event Type Balance sheet Income Statement Statement of cash flows Assets = Liabilities + Stock holders equity revenue - Expenses =net icnome 1 (a) AS + + NA NA NA NA NA NA 1 (b) AE +/- NA NA NA NA NA - OA 2 . AU - - NA NA NA NA NA NA 3 (a) Discount AU - - NA NA NA NA NA NA 3 (b) pay AU - - NA NA NA NA - OA 4 (a) Sale AS + NA + + NA + NA NA 4(b) Cost AU - NA - NA + - NA NA 5(a) Return received AU - NA - - NA - - OA 5(b) return costs AS + NA + NA - + NA NA 6 freight AU - NA - NA + - - OA 7 (a) Discount AU - NA - - NA - NA NA 7 (b) Collection AE +/- NA NA NA NA NA + OA 8 Adjustment AU - NA - NA + - NA NA

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