Question

The beginning account balances for Terry’s Auto Shop as of January 1, Year 2, follows:

Account Titles	Beginning Balances
Cash	$	6,140
Inventory		3,020
Common Stock		7,350
Retained Earnings		1,810

The following events affected the company during the Year 2 accounting period:

1. Purchased merchandise on account that cost $4,150.
2. The goods in Event 1 were purchased FOB shipping point with freight cost of $250 cash.
3. Returned $420 of damaged merchandise for credit on account.
4. Agreed to keep other damaged merchandise for which the company received an $255 allowance.
5. Sold merchandise that cost $2,690 for $4,890 cash.
6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $115 cash.
7. Paid $2,950 on the merchandise purchased in Event 1.

Organize appropriate ledger accounts under an accounting equation. Record the beginning balances and the transaction data in the accounts. In the last column of the table, provide appropriate input neededs for the Retained Earnings amounts. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Earnings" column may require an input - leave cells blank if there is no corresponding Retained Earnings input needed.)

Answer 1

+ + + Terry's Auto Shop Accounting equation Assets Liabilties + Equity Events Cash Inventory = Accounts Payable + Common Stock + Retained Earnings Accounts Titles for Retained Earnings Beg Bal $ 6,140 $ 3,020 = + $ 7,350 + $ 1,810 $ 4,150 = $ 4,150 + $ (250) $ 250 = $ (420) = $ (420) + $ (255) = $ (255) + $ 4,890 4,890 Sales $ (2,690) = (2,690) Cost of goods sold 6 $ (115) (115) Freight out expenses $(2,950) (2,950) + Totals $7,715 $ 4,055 = $ 525 + $ 7,350 + $ 3,895 + + + + + + + + + $ +