Question

Required information [The following information applies to the questions displayed below. At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Land Common stock Retained earnings $ 6,900 15,000 7,000 15,000 13,900 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,200 on account from Ross Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $190 were paid in cash. 2. Returned $400 of the inventory it had purchased from Ross Company 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 $6,800 for $12,100 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $900 and was sold to the customer for $1,680 cash. The customer was paid $1,680 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $140 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Sold the land for $8,500. 9. Recognized accrued interest income of $600. 10. Took a physical count indicating that $13,400 of inventory was on hand at the end of the accounting period. (Hint: Determine the current balance in the inventory account before calculating the amount of the inventory write down.)

Answer 1

Credit Debit $ 12,100 $ 600 $ 1,500 Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. ci Multistep Income Statement: Closing Entries: Sales Revenue $ 12,100 Less: Sales Sales Returna and allowance $ 1,680 Interest Revenue Sales Discount $ 242 $ -1,922 Gain on Sale of Land Net Sales Revenue $ 10,178 Sales Return and Allowance Less: Cost of Goods Sold $ -6,542 Sales Discount Gross Margin $ 3,636 Cost of goods sold Less: Freight Expense $ -140 Freight Expense Operating Income $ 3,496 Retained Earning Non Operating Item: (To record closing entry) Interest Income $ 600 Gain on sale of Land $ 1,500 $ 2,100 Net Income $ 5,596 $ 1,680 $ 242 $ 6,542 $ 140 $ 5,596 $ 15,000 $ $ 15,000 c2 Statement of change in equity: Beginning Stock Add: Stock Issued Ending Common Stock Beginning Retained Earning Add: Net Income Ending Retained Earning Ending Stockholder's Equity $ 13,900 $ 5,596 $ 19,496 $ 34,496

c3 Balance Sheet: $ 20,496 $ $ 13,400 $ 600 $ 34,496 Assets: Cash Accounts Receivable Inventory Interest Receivable Total Assets Liabilities: Accounts Payable Total Liabilities Stockholder's Equity: Common Stock Retained earning Total Stockholder's Equity Total Liabilities and Equity $ $ $ 15,000 $ 19,496 $ 34,496 $ 34,496 c4 Statement of Cash Flow Cash flows from operating activities: Received from Accounts Receivable Payment of Inventory Payment of Freight outward Payment of Freight inward Payment of Returned goods Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash Add: Beginning Balance Ending cash balance $ 11,858 $ -4,752 $ - 190 $ - 140 $ -1,680 $ 5,096 $ 8,500 $ $ 13,596 $ 6,900 $ 20,496