The following information applies to the questions displayed below) At the begin
ID: 2810597 • Letter: T
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The following information applies to the questions displayed below) At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $8,700 2,700 8,280 3,200 During Year 2, the company experienced the following events 1. Purchased inventory that cost $6.200 on account from Ross 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 it had purchased because the inventory was damaged in transit. The seller agreed to pay the return freight cost 3. Pald the amount due on its account payable to Ross 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 recelvable within the discount period 8. Took a physical count indicating that $2.400 of Inventory was on hand at the end of the accounting perlod b. 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.)Explanation / Answer
REDO COMPANY Horizontal Statement Model - Year 2 Balance Sheet Income Statement Event Assets Liabilities + Stockholders Equity Cash + AR + Inventory = Accounts Payable + Common stock + Retained Earnings Revenue - Expenses = Net Income Statement of Cash flows Bal. $8,700.00 + + $2,700.00 = + $8,200.00 + $3,200.00 - = NA 1a + + $6,200.00 = $6,200.00 + + - = NA 1b -$570.00 + + = + + - $570.00 = -$570.00 -$570.00 OA 2 + + -$300.00 = -$300.00 + + - = NA 3 -$5,782.00 + + = -$5,900.00 + + $118.00 - = $118.00 -$5,782.00 OA 4a + $9,700.00 + = + + $9,700.00 - = $9,700.00 NA 4b + + -$6,700.00 = + + - $6,700.00 = -$6,700.00 NA 5a -$870.00 + + = + + -$870.00 - = -$870.00 -$870.00 OA 5b + + $570.00 = + + - -$570.00 = $570.00 NA 6 -$670.00 + + = + + - $670.00 = -$670.00 -$670.00 OA 7 $9,506.00 + -$9,700.00 + = + + - $194.00 = -$194.00 $9,506.00 OA 8 + + -$70.00 = + + - $70.00 = -$70.00 NA $10,314.00 + $0.00 + $2,400.00 = $0.00 + $8,200.00 + $3,200.00 $8,948.00 - $7,634.00 = $1,314.00 $1,614.00
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