a newconnect t.mheducation Connect Access Help Save & Exi ter 4 Review Assignmen

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a newconnect t.mheducation Connect Access Help Save & Exi ter 4 Review Assignment Required information 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: 1 3 of 3 $7,700 1.700 Common stock 2,200 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5.200 on account from Ross Company under terms 2/10, n/30. The merchandise was delvered FOB shipping point. Freight costs of $470 were paid in cash. 2. Returned $400 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 $5,700 for $8,700 on account, under terms 2/10, n/45. 5. Received merchandise retuned from a customer. The merchandise originally cost $470 and was sold to the customer for $770 cash. The customer was paid $770 cash for the returned merchandise 6. Delivered goods FOB destination in Event 4 Freight costs of $570 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $1,400 of inventory was on hand at the end of the accounting period. c-1 Prepare a multisteo income statement 50 p 5 8

Explanation / Answer

Journal Entry Event General Journal Debit Credit 1a Merchandise Inventory $5,200 To Accounts Payable $5,200 1b Merchandise Inventory 470 To Cash 470 2 Accounts Payable 400 To Merchandise Inventory 400 3a Accounts Payable 96 To Merchandise Inventory 96 3b Accounts Payable 4704 To Cash 4704 4a Accounts Receivable 8700 To Sales Revenue 8700 4b Cost of Goods Sold 5700 To Merchandise Inventory 5700 5a Sales Revenue 770 To Cash 770 5b Merchandise Inventory 470 To Cost of Goods Sold 470 6 Transportation out 570 To Cash 570 7a Sales Revenue 174 To Accounts Receivable 174 7b Cash 8526 To Accounts Receivable 8526 8 Cost of Goods Sold 244 To Merchandise Inventory 244 Inventory Loss REDD COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, YEAR 2 Net Sales $7,756 Cost of Goods Sold 5474 Gross Margin $2,282 Operating Expenses Transportation out 570 Net Income $1,712 REDD COMPANY STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY FOR THE YEAR ENDED DECEMBER 31, YEAR 2 Beginning Common Stock 7200 Beginning Retained Earnings 2200 Add : Net Income $1,712 Ending Retained earnings $3,912 Total Stockholders Equity $11,112 REDD COMPANY BALANCE SHEET AS OF DECEMBER 31, 2016 Assets Cash 9712 Merchandise Inventory 1400 Total assets 11112 Liabilities Stockholders Equity Common Stock 7200 Retained Earnings $3,912 Total Stockholders Equity 11112 Total Laibilities and stockholders equity REDD COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, YEAR 2 Cash flows from operating activities Inflow from customers 7756 Outflow for expenses $570 Outflow for inventory $5,174 Net cash flow from operating activities $2,012 Cash flows from investing activities 0 Cash flows from financing activities 0 Net Change in Cash 2012 Plus : Beginning cash balance $7,700 Ending Cash balance $9,712

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