[The following information applies to the questions displayed below.] The trial
ID: 2337710 • Letter: #
Question
[The following information applies to the questions displayed below.]
The trial balance for Terry’s Auto Shop as of January 1, 2016, follows:
Account Titles
Debit
Credit
Cash
$
6,090
Inventory
3,150
Common Stock
$
7,480
Retained Earnings
1,760
Total
$
9,240
$
9,240
The following events affected the company during the 2016 accounting period:
1.
Purchased merchandise on account that cost $4,280.
2.
The goods in Event 1 were purchased FOB shipping point with freight cost of $215 cash.
3.
Returned $420 of damaged merchandise for credit on account.
4.
Agreed to keep other damaged merchandise for which the company received an $275 allowance.
5.
Sold merchandise that cost $2,580 for $4,790 cash.
6.
Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $145 cash.
7.
Paid $2,980 on the merchandise purchased in Event 1.
Required
a.
Record the events in general journal format. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Event 1:Record entry for purchase of merchandise on account.
Event 2: Record entry cash paid for freight cost.
Event 3: Record entry to return of damaged merchandise for credit on account.
Event 4: Record entry for allowances to keep other damaged Merchandise.
Event 5: Record sale inventory for cash.
Event 6: Record entry for cost of goods sold.
Event 7: Record entry for freight cost paid.
Event 8: Record cash paid for merchandise purchased.
b.
Open general ledger T-accounts with the appropriate beginning balances, and post the journal entries to the T-accounts.
Cash
Accounts Payable
Beg. Bal
Beg. Bal
End. Bal
End. Bal
Merchandise Inventory
Common Stock
Beg. Bal
Beg. Bal
End. Bal
End. Bal
Retained Earnings
Sales Revenue
Beg. Bal
Beg. Bal
End. Bal
End. Bal
Cost of Goods Sold
Transportation-out
Beg. Bal
Beg. Bal
End. Bal
End. Bal
c.
Prepare an income statement, balance sheet, and statement of cash flows. (Assume that closing entries have been made.) (Statement of Cash Flows only, items to be deducted must be indicated with a negative amount.)
TERRY'S AUTO SHOP
Income Statement
For the Year Ended December 31, 2016
Operating expenses
TERRY'S AUTO SHOP
Balance Sheet
As of December 31, 2016
Assets
Total assets
Liabilities
Total liabilities
Stockholders’ equity
Total stockholders' equity
Total liabilities and stockholders' equity
TERRY'S AUTO SHOP
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash flow from operating activities
Net cash flow from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net change in cash
Ending cash balance
d.
Why does a difference exists between net income and net cash flow from operating activities.
The difference between net income and net cash flow from operating activities exists because the shop is not selling all the inventory that it purchased during the period.
[The following information applies to the questions displayed below.]
Explanation / Answer
2)
3a )
4. Thedifference between net income and operating activities is due to the inventoey, only part of the inventory is sold.
a) general journal Debit Credit Event1 Merchandise Inventory $ 4,280.00 Accounts payable $ 4,280.00 TO Record purchase of merchandise on account. Event2 Merchandise Inventory $ 215.00 Cash $ 215.00 To Record cash paid for freight cost. Event 3 Accounts payable $ 420.00 Merchandise Inventory $ 420.00 TO Record return of damaged merchandise for credit on account. Event 4 Accounts payable $ 275.00 Merchandise Inventory $ 275.00 TO Record allowances to keep other damaged Merchandise. Event 5 Cash $ 4,790.00 Sales Revenue $ 4,790.00 To Record sale inventory for cash. Event 6 Cost of goods sold $ 2,580.00 Merchandise Inventory $ 2,580.00 To Record for cost of goods sold Event 7 Transportation-out Account $ 145.00 Cash $ 145.00 To Record freight cost paid. Event 8 Accounts payable $ 2,980.00 Cash $ 2,980.00 To record cash paid for merchandise purchased.Related Questions
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