Question

Help Se At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $8,400 2,000 8,000 2.400 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,600 on account from Ross Company under terms 2/10, 1/30. The merchandise was delivered FOB shipping point. Freight costs of $500 were paid in cash. 2. Returned $400 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 Ross Company within the cash discount period. 4. Sold inventory that had cost $6,000 for $9,000 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 $840 cash. The customer was paid $840 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $600 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $1,800 of Inventory was on hand at the end of the accounting period. c-1. Prepare a multistep income statement. c-2. Prepare a statement of changes in stockholders' equity c-3. Prepare a balance sheet c-4. Prepare a statement of cash flows.

Answer 1

c-1. Income Statement -

REDD COMPANY Income Statement For Year 2 Sales Revenue (-) Sales Return (-) Freight Out (-) Sales Discounts $ 9,000 $ (840) $ (600) $ (180) $ 7,380 Cost of Goods Sold Op. Balance Inventory (+) Purchase (+) Freight In (-) Purchase Return (-) Discount on Purchase (+) Closing Inventory $ 2,000 $ 5,600 $ 500 $ (400) $ (104) $ (1,800) $ 5,796 Gross Profit $ 1,584 Operating Income $ 1,584 Net Income $ 1,584

c-2. Statement of Stockholder's Equity -

REDD COMPANY Statement of Stockholder's Equity For Year 2 Common Stock $ 8,000 Retained Earnings, Begninning $ 2,400 Add: Net Income $ 1,584$ 3,984 Total Stockholder's Equity $ 11,984

c-3. Balance Sheet -

REDD COMPANY Balance Sheet For Year 2 Assets: Cash Inventory $ 10,184 $ 1,800 Total Assets $ 11,984 Liabilities: Stockholder's Equity: Common Stock Retained Earnings $ 8,000 $ 3,984 $ 11,984 Total Stockholder's Equity $ 11,984

c-4. Cash Flow Statement -

REDD COMPANY Cash Flow Statement For Year 2 Cash Flow From Operating Activities Cash Received from Customers $ 7,980 Cash Paid to Suppliers $ (5,096) Cash Paid to Expenses $ (1,100) Profit on sale of land $ 1,500 Net Cash Flow From Operating Activities $ 3,284 Cash Flow From Investing Activities Net Cash Flow From Investing Activities $ Cash Flow From Financing Activities Net Cash Flow From Financing Activities $ Change in Cash $ 3,284 Cash at the beginning Cash at the end $ 6,900 $ 10,184