Question

At the beginning of Year 2, the Redd Company had the following balances in its accounts:

Cash	$	16,800
Inventory		9,000
Land		3,900
Common stock		17,000
Retained earnings		12,700

During Year 2, the company experienced the following events:

1. Purchased inventory that cost $13,100 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $990 were paid in cash.
2. Returned $900 of the inventory it had purchased from Ross Company because the inventory was damaged in transit. The seller agreed to pay the return freight cost.
3. Paid the amount due on its account payable to Ross Company within the cash discount period.
4. Sold inventory that had cost $12,500 for $21,500 on account, under terms 2/10, n/45.
5. Received merchandise returned from a customer. The merchandise originally cost $2,150 and was sold to the customer for $3,000 cash. The customer was paid $3,000 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $880 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Sold the land for $7,300.
9. Recognized accrued interest income of $650.
10. Took a physical count indicating that $5,100 of inventory was on hand at the end of the accounting period. (Hint: Determine the current balance in the inventory account before calculating the amount of the inventory write down.)

Record the events in general journal format. Assume that the perpetual inventory method and gross method is used.

Answer 1