Question

Saved The beginning account balances for Terry's Auto Shop as of January 1, Year 2, follow: Account Titles Beginning Balances Cash $6,010 Inventory 3,190 Common Stock 7,490 Retained Earnings 1,710 3 The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $4.100. 2. The goods in Event 1 were purchased FOB shipping point with freight cost of $270 cash. 3. Returned $430 of damaged merchandise for credit on account. 4. Agreed to keep other damaged merchandise for which the company received a $285 allowance. 5. Sold merchandise that cost $2.680 for $4.810 cash 6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $190 cash 7. Paid $2,980 on the merchandise purchased in Event 1. Jook b. Prepare an income statement and a statement of cash flows for Year 2. (Assume that closing entries have been made.) nferences Complete this question by entering your answers in the tabs below. Income Statement Statement of Cash Flows Prepare an income statement TERRY'S AUTO SHOP Income Statement For the Year End December 31 Year 2

Answer 1

Answer:

Terr's Auto Shop
Income Statement
For the year Ended December 31, Year 2
Particulars	Notes No	Amount ($)
i) Revenue from operations		4,810
ii) Other Revenue (Allowance Transfer)		285
iii) Total Income (i) + (ii)		5,095
iv) Expenses
Material Consumed
(Opening + Purchase - Returrn- Closing)	i)	2,680
(3,190 + 4,100 - 430 - 4,180)
Freight inward		270
Freight Outward		190
Profit / Loss for the Period		1,955

Notes No :

i) Closing Stock :

Opening Stock = 3,190

(+) Purchase less returns = 3670   (4100-430)

(-) Cost of Goods Sold = (2,680)

Closing Stock = 4,180

Terr's Auto Shop
Income Statement
For the year Ended December 31, Year 2
Particulars	Amount ($)	Amount ($)
Cash Flows From Operating Activity:
Cash from Sold Merchandise	4,810
Cash from allowance from supplier	285
(-) Cash outfow for freight (270 + 190)	(460)
(-) Payment made to supplier	(2,980)
Net Cashflow from Operating Activity		1,655
Cash Flow From Investing Activity		0
Cash Flow From Financing Activity		0
Net Change in Cash		1,655
Opening Cash Balance		6,010
Closing Cash Balance		7,665