Question

At the beginning of 2018, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $ 8,100 2,100 7,600 2,600 During 2018, the company experienced the following events: 1. Purchased inventory that cost $5,600 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $510 were paid in cash. 2. Returned $300 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 Redd Company within the cash discount period. 4. Sold inventory that had cost $6,100 for $9,100 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $510 and was sold to the customer for $810 cash. The customer was paid $810 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $610 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.

If needed:

Answer 1

Redd Company Adjusted Trial Balance For the period ending Year 2 Journal Enteries Event Particulars la. Merchandise Inventory a/c To Accounts Payable (Inventory on account) Dr. Debit in $ Credit in $ 5600 5600 Post Closing Debit in $ Credit in $ Debit in $ Credit in $ 9894 9894 0 0 Particulars Cash Interest Receivable Accounts Receivable Merchandise Inventory Land 1b. Dr 510 0 0 Merchandise Inventory a/c To Cash (Inventory in cash) 510 1800 1800 0 0 0 2 Dr. 300 7600 Accounts Payable a/c To Merchandise Inventory (Goods returned) 7600 2600 300 4094 0 9100 3 Dr. 5300 Accounts Payable a/c To Merchandise Inventory To Cash 4300 x 2% = 106 Accounts Payable Common stock Retained earnings Interest Income Sales Sales Discount Sales Return and Allowances Cost of goods sold Delivery cost Gain on sale of Land Totals 106 5194 182 810 6004 610 0 4 Dr. 9100 19300 19300 11694 11694 Accounts Receivable a/c To Sales (Sales made on account) 9100 Dr. 6100 Cost of goods sold a/c To Merchandise Inventory (To record cost of goods sold) 9100 -182 6100 -810 Statement of Income For the period ending Year 2 Sales Sales Discount Sales Return and Allowances Net Sales Cost of goods sold Gross profit Delivery cost Net Income 5 810 Sales Return and Allowances a/c Dr. To Cash (Goods returned by customer) 8108 -6004 2104 -610 810 1494 Event Dr. Particulars Merchandise Inventory a/c To Cost of goods sold (Goods returned by customer) Debit in $ Credit in $ 510 510 Statement of Changes on Stockholders Equity For the period ending Year 2 Common Retained Stock Earnings Beginning Balance 7600 2600 Add:Net Income 1494 7600 4094 Totals 10200 6 Dr. 610 Delivery cost a/c To Cash (Delivery cost paid) 610 1494 11694 7 8918 182 Cash a/c Dr. Sales Discount a/c Dr. To Accounts Receivable (Cash from debtors in discount period) 9100 Statement of Cashflows For the period ending Year 2 Cashflow from Operating Activity Net Income Adjustments: Decrease in Inventory Cash generated from Operating Actiivty 1494 8 Dr. 300 300 1794 Cash a/c To Land To Gain on sale of Land (Land sold) 0 Cashflow from Investing Activity 9 Dr. Interest Receivable a/c To Interest Income (Interest income accrued) 0 Cashflow from Financing Activity 10 414 414 Cost of goods sold a/c Dr. To Merchandise Inventory (To record cost of goods sold) 2100 + 5600+510-300-106-6100+510-1800 Net Increase in Cash Beginning Cash Balance Ending Cash Balance 1794 8100 9894 Debit in $ Credit in $ 7606 Closing Entry Date Particulars Year 2 Income Summary a/c Dr. To Sales Discount To Sales Return and Allowances To Cost of goods sold To Delivery cost (Expense accounts closed) 182 810 6004 610 Year 2 Dr. 9100 Dr. 0 Sales a/c Gain on sale of Land a/c Interest Income a/c To Income Summary (Revenue accounts closed) Dr. 0 9100 Year 2 Dr. 1494 Income Summary a/c To Retained earnings (Profits transferred) 1494

9100 Bal. Accounts Receivable Land 510 5194 Cash 8100 Merchandise Inventory 8918 Accounts Payable O Sales Return and Allowances O Delivery cost Bal. 17018 Sales Accounts Receivable 9100 9100 Income Summary 810 9100 Gain on sale of Land 610 9894 17018 Accounts Receivable Sales Discount 182 Income Summary 182 182 Interest Receivable 182 Interest Income 0 Bal. 0 0 ol Accounts Receivable Sales Return and Allowances 810) Income Summary 810 810 810 Sales 8918 Accounts Receivable 9100 Cash Sales Discount Sales Return and Allowances 9100 182 810 Cost of goods sold 6100 Merchandise Inventor 414 Merchandise Inventory Merchandise Inventory 510 9910 6004 Income Summary 6514 6514 300 106 Bal. Accounts Payable Cash Cost of goods sold Merchandise Inventory 2100 Accounts Payable 5600 Accounts Payable 510 Cost of goods sold 510 Cost of goods sold Bal. 6100 Cash Delivery cost 610 Income Summary 610 414 610 1800 610 8720 8720

Accounts Payable 300 Merchandise Inventory 106 Merchandise Inventory Merchandise Inventory Cash 5600 5194 0 5600 5600 Common stock Bal. 7600 7600 Bal. 7600 7600 2600 Retained earnings Bal. Income Summary 4094 4094 1494 Bal. 4094 Interest Income Interest Receivable 01 0 Bal. . 0 0

Balance sheet As at 31.12.Year 2 Assets Current Assets Cash Interest Receivable Merchandise Inventory Amounts in $ Amounts in $ Liabilites & Equity Amounts in $ Amounts in $ Current Liabilities 9894 0 1800 11694 Shareholders Equity Common stock 7600 Retained earnings 4094 11694 11694 Total Liabilities & Equity 11694 Non Current Assets Total Assets