Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below] At the beginning of 2018, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $8,200 2,200 7,700 2,700 During 2018, the company experienced the following events 1. Purchased inventory that cost $5,700 on account from Redd Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $520 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 $6,200 for $9,200 on account, under terms 2/10, n/45 5. Received merchandise returned from a customer. The merchandise originally cost $520 and was sold to the customer for $820 cash. The customer was paid $820 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $620 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $1,900 of inventory was on hand at the end of the accounting period.

Explanation / Answer

REDD COMPANY Horizontal Statements Model - 2018 Event Balance Sheet Income Statement Statement of Cash flows Assets = Liabilities + Stockholders' Equity Revenue - Expenses = Net Income Cash + Accounts receivable + Merchandise Inventory = Accounts Payable + Common Stock + Retained earnings Bal. 8200 + + 2200 = + 7700 + 2700 - = NA 1a. + + 5700 = 5700 + + - = NA 1b. -520 + + = + + - 520 = -520 -520 OA 2 + + -350 = -350 + + - = NA 3 -5243 + + = -5350 + + 107 - = 107 -5234 OA (5350*98%) (5350*2%) 4a. + 9200 + = + + 9200 - = 9200 NA 4b. + + -6200 = + + - 6200 = -6200 NA 5a. -820 + + = + + -820 - = -820 -820 OA 5b. + + 520 = + + - -520 = 520 NA 6 -620 + + = + + - 620 = -620 -620 OA 7 9016 + -9200 + = + + - 184 = -184 9016 OA (9200*98%) (9200*2%) 8 + + 30 = + + 30 - = 30 OA Bal. 10013 + 0 + 1900 = 0 + 7700 + 2700 8517 - 7004 = 1513

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