Comprehensive cycle problem: Perpetual systemAt the beginning of 2011, D&L Enterprises...

Comprehensive cycle problem: Perpetual system

At the beginning of 2011, D&L Enterprises had the following balances in its accounts:

During 2011. D&L Enterprises experienced the following events:

1. Purchased inventory costing $5,600 on account from Hill Company under terms 2/10. n/30. The merchandise was delivered FOB shipping point. Freight costs of $500 were paid in cash.

2. Returned $400 of the inventory that it had purchased because the inventory was damaged in

transit. The freight company agreed to pay the return freight cost.

3. Paid the amount due on its account payable to Hill Company within the cash discount period.

4. Sold inventory that had cost $6,000 for $9,000. The sale was on account under terms  2/10, n/45.

5. Received merchandise returned from a customer. The merchandise had originally cost $520 and had been sold to the customer for $840 cash. The customer was paid $840 cash for the returned merchandise.

6. Delivered goods in Event 4 FOB destination. Freight costs of $600 were paid in cash.

7. Collected the amount due on accounts 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.

Required

a. Identify each of these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event affects the financial statements by plac­ing a + for increase, - for decrease, or NA for not affected under each of the components in the following statements model. Assume that the perpetual inventory method is used. When an event has more than one part, use letters to distinguish the effects of each part. The first event is recorded as an example.

b. Record the events in general journal format.

c. Open ledger T-accounts and post the beginning balances and the events to the accounts.

d. Prepare a multistep income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows.

e. Record and post the closing entries, and prepare a post-closing trial balance.