Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below.j At the beginning of 2018, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $7,800 1, 800 7,300 2,300 During 2018, the company experienced the following events: 1. Purchased inventory that cost $5,300 on account from Redd Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $480 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 $5,800 for $8,800 on account, under terms 2/10, n/45 5. Received merchandise returned from a customer. The merchandise originally cost $480 and was sold to the customer for $780 cash. The customer was paid $780 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $580 were paid in cash. 7. Collected the amount due on the account receivable within the discount period 8. Took a physical count indicating that $1,500 of inventory was on hand at the end of the accounting period

Explanation / Answer

REDD COMPANY Income Statement For the year Ended December 31,2018 Sales 7859.6 Less: Cost of Goods sold 5151 (Opening Inventory +Purchases-Closing Inventory) Gross profit 2708.6 Less: Operating Expenses Freight 1060 Net Profit 1648.6 REDD COMPANY Statement of Change in Stockholder's Equity For the year Ended December 31,2018 Beginning Common Stock 7300 Common Stock issued during year 0 Ending Common Stock 7300 Beginning Retained Earnings 2300 Net Profit during the year 1648.6 Ending Retained Earnings 3948.6 Total Stockholder's Equity 11248.6 REDD COMPANY Balance Sheet As of December 31, 2018 Asset Cash 9748.6 Inventory 1500 Total Asset 11248.6 Liabilities 0 Stockholder's Equity Common Stock 7300 Retained Earnings 3948.6 Total Stockholder's Equity 11248.6 Total Liabilities and Stockholder's Equity 11248.6 REDD COMPANY Statement of Cash Flow For the Year Ended December 31, 2018 Cash flow from operating activities Net operating Profit 1648.6 Add: Decrease in Inventory 300 Net cash flow from operating activities 1948.6 Cash flow from investing activities 0 Cash flow from financing activities 0 Net change in cash 1948.6 Opening Cash Balance 7800 Ending cash Balance 9748.6

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