Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed belowj 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 merch andise was delivered FOB shipping point. Freight costs of $520 were paid in cash. 2. Returned $350 of the tnventory 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 theraccounting period

Explanation / Answer

REDD COMPANY Income Statement For the year ended Dec 31, 2018 $ Net Sales revenue (9200-820) 8380 Cost of goods sold (6200-520-30) 5650 Gross margin 2730 Operating expenses: Freight in (520+620) 1140 Discount allowed 184 Other income: Discount received 107 Net income (2730-1140-184+107) 1513 REDD COMPANY Statement of changes in stockholders' equity For the year ended Dec 31, 2018 $ $ Beginning common stock 7700 Additions / Deletions 0 Ending common stock 7700 Beginning Retained earnings 2700 Net income 1513 Ending Retained earnings 4213 Total stockholders' equity 11913 REDD COMPANY Balance Sheet As of Dec 31, 2018 $ $ Assets Cash 10013 Accounts receivable 0 Merchandise Inventory 1900 Total assets 11913 Liabilities Accounts payable 0 Stockholders' equity Common stock 7700 Retained earnings 4213 Total Stockholders' equity 11913 Total Liabilities & Stockholders' equity 11913 REDD COMPANY Statement of Cash flows For the year ended Dec 31, 2018 $ $ Cash flow from operating activites Net Cash from accounts receivable (9016-820) 8196 Cash paid to accounts payable -5243 Freight charges paid -1140 Net Cash flow from operating activites 1813 Cash flow from Investing activites Cash flow from Financing activites Net change in cash 1813 Beginning cash balance 8200 Ending cash balance 10013

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