Question

The beginning account balances for Terry’s Auto Shop as of January 1, 2018, follows:

Account Titles Beginning Balances

Cash $ 6,170

Inventory 3,050

Common Stock 7,360

Retained Earnings 1,860

The following events affected the company during the 2018 accounting period:

Purchased merchandise on account that cost $4,260.

The goods in Event 1 were purchased FOB shipping point with freight cost of $245 cash.

Returned $465 of damaged merchandise for credit on account.

Agreed to keep other damaged merchandise for which the company received an $210 allowance.

Sold merchandise that cost $2,680 for $4,800 cash.

Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $135 cash.

Paid $2,920 on the merchandise purchased in Event 1.

Prepare an income statement and a statement of cash flows for 2018. (Assume that closing entries have been made.)

Answer 1

Terry AUTO Shop income Stalement for the year ended sale, Dec 31 18 NeT 4800 2680 cost of goods sold Gross profit 2120 operating expences Trony poration cost 135 Net Income 1985 Stalement of Cash flows cash flow from operceling activitiee: cash inflow from customer 4800 cash out flow for inventory - 3165 cash out flow for eafence - 135 1500 cash flow cash flow from from Investing activities Pinoneing activities Cash Change Ne (+) Begginung cajn. Balanc 1500 6170 Ending cash Balance 7670