Question

ework-Chapter 3 Required Information 1 of 3 Exercise 3-7 Effect of purchase returns and allowances and freight costs on the financial statements: Perpetual system LO 3-2 following information applies to the questions displayed below. The beginning account balances for Terry's Auto Shop as of January 1, 2018, follows: Account Titles Beginning Balances Cash Inventory Common Stock Retained Earnings $16,000 8,800 28,800 4,000 The following events affected the company during the 2018 accounting period: 1. Purchased merchandise on account that cost $15.000 2. The goods in Event 1 were purchased FOB shipping point with freight cost of $800 cash. 3. Returned $2600 of damaged merchandise for credit on account. 4. Agreed to keep other damaged merchandise for which the company receiveda $1.100 allowance. 5. Sold merchandise that cost $15.000 for $31,000 cash. 6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $500 cesh 7. Pald $8,000 on the merchandise purchased in Event 1 Exercise 3-7 Parta Required o. Organice approprete tesper.eccounts under an accounting esuation Resero he seaimmine bsances and the transaction care n

Answer 1

Accounting Equation is as prepared below:

	Assets		=	Liabilities	Equity
Event Number	Cash +	Inventory +	=	Accounts Payable	Common stock	+	Retained earnings	Accounts Titled for retained earning
Beg bal.	16,000	8,000			20,000		4,000
1		15,000		15,000
2	-800	800
3		-2,600		-2,600
4		-1,100		-1,100
5a	31,000						31,000	Sales Revenue
5b		-15,000					-15,000	Cost of Goods Sold
6	-500						-500	Shipping Cost
7	-8,000			-8,000
	37,700	5,100		3,300	20,000		19,500