Question

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

Account Titles Beginning Balances

Cash $ 6,010

Inventory 3,140

Common Stock 7,320

Retained Earnings 1,830

The following events affected the company during the Year 2 accounting period: Purchased merchandise on account that cost $4,160. The goods in Event 1 were purchased FOB shipping point with freight cost of $270 cash. Returned $470 of damaged merchandise for credit on account. Agreed to keep other damaged merchandise for which the company received an $240 allowance. Sold merchandise that cost $2,660 for $4,760 cash. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $170 cash. Paid $2,820 on the merchandise purchased in Event 1. Required a. 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.

Answer 1

+ + + Terry's Auto Shop Accounting equation Assets Liabilties + Equity Events Cash Inventory = Accounts Payable + Common Stock + Retained Earnings Retained Earnings heads Beg Bal $ 6,010 $ 3,140 = + $ 7,320 + $ 1,830 $ 4,160 = $ 4,160 + $ (270) $ 270 = $ (470) = $ (470) $ (240) = $ (240) + $ 4,760 4,760 Sales $ (2,660) = (2,660) Cost of goods sold 6 $ (170) (170) Freight out expenses $(2,820) = $ (2,820) + Totals $7,510 $ 4,200 = $ 630 + $ 7,320 + $ 3,760 + + + + + + + + $ +