At the beginning of 2018, the Redd Company had the following balances in its acc

Question

At the beginning of 2018, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $ 8,000 2,000 7,500 2,500 During 2018, the company experienced the following events: . Purchased inventory that cost $5,500 on account from Redd Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $500 were paid in cash 2. Returned $350 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 $6,000 for $9,000 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $500 and was sold to the customer for $800 cash. The customer was paid $800 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $600 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $1,700 of inventory was on hand at the end of the accounting perioc

Explanation / Answer

Trans Accounts Title Dr Cr 1 Inventory 6000 Cash 500 Accounts payabkle 5500 2 Accounts payable 350 Inventory 350 3 Accounts payable 5150 Cash 5047 Inventory (5500-350)*2% 103 4 Accounst Receivable 9000 Sales 9000 Cost of good sold 6000 Inventory 6000 5 Sales return 800 Cash 800 Inventory 500 Cost of good sold 500 6 Freight out 600 Cash 600 7 Cash 8820 Sales Discount(9000*2%) 180 Accounst Receivable 9000 8 Cost of good sold 647 Inventory 647 (2000+6000-350-103-6000+500-1700) Income statement Sales 9800 Less: sales return 800 Less: sales discount 180 Net sales 8820 Less: cost of Good sold 6147 Gross profit 2673 Less: operating exppenses Freight out 600 Net Income 2073 Statement of change in Stockholder equity Beginning Common stock 7500 Ending common stock 7500 Beginning Retained eranings 2500 Add net Income 2073 ending Retained eranings 4573 Total stockholder Equity 12073 Balance Sheet Assets Cash 10373 Inventory 1700 Total assets 12073 Liabilities & Stockholder Equity Stockholder Equity Common stock 7500 Reatine dEranings 4573 Total stockholder equity 12073 Total Liabilities & Stockholder Equity 12073 Cash flow from operating activities Cash collected from cutomers 8820 Cash paid to suppliers -5047 Cash paid for freight out -600 Cash paid to customers -800 Net cash flow from opearting Activities 2373 Cash flow from Investing activities 0 Cash flow from financing activities 0 Net Incraese in cash 2373 Beginning bal 8000 Ending bal 10373

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