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At the beginning of Year 2, the Redd Company had the following
balances in its accounts:
Cash | $ | 16,800 |
Inventory | 4,000 | |
Land | 2,000 | |
Common stock | 12,000 | |
Retained earnings | 10,800 | |
During Year 2, the company experienced the following
events:
d. Prepare a multistep income statement, a statement of changes in stockholders’ equity, a balance sheet, and a statement of cash flows for year 2.
REDD COMPANY | ||
Multistep Income Statement | ||
Revenues | ||
Sales | 13,500 | |
Less: | ||
Sales discounts | (270) | |
Sales returns & allowances | (2,100) | |
Net sales | 11,130 | |
Cost of Goods Sold | ||
Beginning inventory | 4,000 | |
Add: | ||
Purchases | 11,200 | |
Freight Inwards | 800 | |
Less: | ||
Purchase returns | (600) | |
Purchase discounts | (212) | |
Ending inventory | (6,500) | |
Cost of Goods Sold | 8,688 | |
Gross profit | 2,442 | |
Operating expenses | ||
Freight outwards | 800 | |
Net operating income | 1,642 | |
Non operating income | ||
Interest expenses | 500 | |
Profit on sale of land | 1,500 | |
Non operating income | 2,000 | |
Net income | 3,642 | |
REDD COMPANY | ||
Statement of Retained Earnings | ||
Beginning balance | 10,800 | |
Adjustment during the year | ||
Restatements during the year | ||
10,800 | ||
Net income for the year | 3,642 | |
Ending balance | 14,442 | |
REDD COMPANY | ||
Statement of Financial Position | ||
Current Assets | ||
Cash | 19,442 | |
Accrued interest income | 500 | |
Inventory | 6,500 | |
26,442 | ||
Non-current assets | - | |
Total assets | 26,442 | |
Current Liabilities | - | |
Non-current liabilities | - | |
Total liabilities | - | |
Shareholders' equity | ||
Common Stock |
12,000 | |
Retained Earnings |
14,442 | |
Total Shareholders' equity | 26,442 | |
Total Liabilities and Shareholders' equity | 26,442 | |
REDD COMPANY | ||
Statement of Cash Flow | ||
Cash flow from operarting activities | ||
Cash receipts from customers | 11,130 | |
Cash payment to suppliers | (10,388) | |
Cash payment for operating expenses | (1,600) | |
Net cash from operations | (858) | |
Cash flow from investing activities | ||
Cash receipt from sale of land | 3,500 | |
Net cash from investing activities | 3,500 | |
Cash flow from financing activities | ||
Cash receipt from issue of shares | - | |
Net cash from financing activities | - | |
Net increase in cash & cash equivalents | 2,642 | |
Beginning cash balance | 16,800 | |
Ending cash balance | 19,442 |
Working notes | |||||||||
Tabular Statement of Transactions | |||||||||
Cash | Inventory | Land |
Accounts Receivable |
Accounts Payables |
Income/ (Expenses) |
Common Stock |
Retained Earnings |
Remarks | |
Beginning balance | 16,800 | 4,000 | 2,000 | - | - | - | 12,000 | 10,800 | |
Purchased Inventory | 11,200 | 11,200 | - | ||||||
Freight paid in Cash | (800) | 800 | Cost of Goods Sold | ||||||
Returned inventory | (600) | (600) | - | ||||||
Paid to Ross Company | (10,388) | (10,600) | (212) | Cost of Goods Sold | |||||
Sold Inventory | 13,500 | (13,500) | Sales | ||||||
Sold Inventory | (8,000) | 8,000 | Cost of Goods Sold | ||||||
Sales Return | (2,100) | 2,100 | Sales returns & allowances | ||||||
Sales Return | 1,200 | (1,200) | Cost of Goods Sold | ||||||
Sales Return | (2,100) | 2,100 | - |
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