Powell Company began the 2018 accounting period with $33,000 cash, $71,000 inven
ID: 2561969 • Letter: P
Question
Powell Company began the 2018 accounting period with $33,000 cash, $71,000 inventory, $52,000 common stock, and $52,000 retained earnings. During 2018, Powell experienced the following events:
Sold merchandise costing $45,500 for $96,000 on account to Prentise Furniture Store.
Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,200 cash.
Received returned goods from Prentise. The goods cost Powell $5,300 and were sold to Prentise for $4,700.
Granted Prentise a $2,300 allowance for damaged goods that Prentise agreed to keep.
Collected partial payment of $76,000 cash from accounts receivable.
Required
A. Record the events in a statements model shown below.
B. Prepare an income statement,
C. a balance sheet
D. a statement of cash flows.
E. Why would Prentise agree to keep the damaged goods?
B.
C.
D.
E.
POWELL COMPANY Financial statements Model for 2018 Event No. can Retained Assets = Stockholders' Equity Income Statement Statement of Cash Accounts Common Flows + Inventory = Revenue - Expenses = Receivable Stock Earnings Income 33,000+ + 71,000 = 52,000 + 52,000 - O + + = + -N -N O Bal 1a. TotalExplanation / Answer
Powell Company Financial Statement model for 2018 Event No Assets Stockholders' Equity Income Statement Statement of Cash flows Cash + Accounts Receivable + Inventory = Common Stock + Retained Earnings Revenue - Expenses = Net Income Bal. 33,000 + + 71,000 = 52,000 + 52,000 = 1a + 96,000 + (45,500) = - + - 96,000 - 45,500 = 50,500 (50,500) 1b (1,200) + + = - + - - 1,200 = (1,200) 2 + (4,700) + 5,300 = - + - (4,700) - (5,300) = 600 (600) 3a + (2,300) + = - + - - - 2,300 = (2,300) 2,300 4 76,000 + (76,000) + = - + - - - - = - 76,000 5 + + = - + 47,600 - - - = - 47,600 Total 107,800 + 13,000 + 30,800 = 52,000 + 99,600 91,300 - 43,700 = 47,600 74,800 Powell Company Income Statement For the year ended December 31,2018 Revenue 91,300 Inventory Sold 40,200 Freight 1,200 Operating Expenses 41,400 Allowance 2,300 Net Income 47,600 Powell Company Balance Sheet As of December 31, 2018 Assets Inventory 30,800 Accounts Receivable 13,000 Cash 107,800 Total Assets 151,600 Liabilities - Stockholders Equity Stock 52,000 Retained Earning 99,600 Total stockholders' equity 151,600 Total Liabilities and stockholders' equity 151,600 Powell Company Statement of Cash Flows For the year ended December 31,2018 Cash flow from Operating activities Net income 47,600 Change in Accounts Receivable (13,000) Change in inventory 40,200 Net cash flow from operating activities 74,800 Cash flow from investing activities - Cash flow from financing activities - Net change in cash 74,800 Opening cash balance 33,000 Ending cash balance 107,800 Prestine agree to keep the damaged goods Gets the goods at reduced cost Can resell the damaged goods X Repair the damaged goods Reatin the damaged goods
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