Question

Powell Company began the 2016 accounting period with $19,800 cash, $61,800 inventory, $48,900 common stock, and $32,700 retained earnings. During 2016, Powell experienced the following events: 1. Sold merchandise costing $37,600 for $74,700 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $355 cash. 3. Received returned goods from Prentise. The goods cost Powell $1,990 and were sold to Prentise for $3,840. 4. Granted Prentise a $1,000 allowance for damaged goods that Prentise agreed to keep. 5. Collected partial payment of $52,400 cash from accounts receivable.

a.	Record the events in general journal format. B. Open general ledger T-accounts with the appropriate beginning balances and post the journal entries to the T-accounts. c. Prepare an income statement, balance sheet, and statement of cash flows.

Answer 1

Event	Account title	Debit	Credit
1	Accounts receivable	74,700
	Sales		74,700
	Cost of goods sold	37,600
	Inventory		37,600
2	Freight out	355
	Cash		355
3	Sales returns and allowances	3,840
	Accounts receivable		3,840
	Inventory	1,990
	Cost of goods sold		1,990
4	Sales returns and allowances	1,000
	Accounts receivable		1,000
5	Cash	52,400
	Accounts receivable		52,400

Accounts receivable
Date	Debit	Date	Credit
1	74,700	3	3,840
		4	1000
		5	52400
		Closing	17,460
Sales
Date	Debit	Date	Credit
		1	74700
Cost of goods sold
Date	Debit	Date	Credit
1	37600	3	1990
Inventory
Date	Debit	Date	Credit
Opening	61800	1	37600
3	1990
Freight out
Date	Debit	Date	Credit
2	355
Cash
Date	Debit	Date	Credit
Opening	19800	2	355
5	52400
Sales returns and allowances
Date	Debit	Date	Credit
3	3840
4	1000

income statement
Particulars	Amount
Sales	74,700
Less returns and allowances	4,840
Net sales	69,860
Less cost of goods sold	35,610
Gross profit	34,250
Less freight out	355
Net income	33,895

Balance sheet
Assets	Amount	Liabilities and equity	Amount
Cash	71,845	Common stock	48900
Accounts receivable	17,460	Retained earnings	66,595
Inventory	26,190
Total assets	1,15,495	Total	115495
			-
Cash	71,845	Common stock	48900
Accounts receivable	17,460	Retained earnings	66,595
Inventory	26,190
Total assets	1,15,495	Total	115495

Cash flow statement
Particulars	Amount
Cash collections	52,400
Less payments	355
Net cash from operations	52,045
Add opening cash	19,800
Closing balance	71,845