Question

The following information applies to the questions displayed below.] At the beginning of 2018, the Redd Company had the following balances in its accounts: Cash $ 8,600 Inventory 2,600 Common stock 8,100 Retained earnings 3,100 During 2018, the company experienced the following events: Purchased inventory that cost $6,100 on account from Redd Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $560 were paid in cash. Returned $350 of the inventory that it had purchased because the inventory was damaged in transit. The seller agreed to pay the return freight cost. Paid the amount due on its account payable to Redd Company within the cash discount period. Sold inventory that had cost $6,600 for $9,600 on account, under terms 2/10, n/45. Received merchandise returned from a customer. The merchandise originally cost $560 and was sold to the customer for $860 cash. The customer was paid $860 cash for the returned merchandise. Delivered goods FOB destination in Event 4. Freight costs of $660 were paid in cash. Collected the amount due on the account receivable within the discount period. Took a physical count indicating that $2,300 of inventory was on hand at the end of the accounting period. c-1. Prepare a multistep income statement. c-2. Prepare a statement of changes in stockholders’ equity. c-3. Prepare a balance sheet. c-4. Prepare a statement of cash flows.

Answer 1

REDD COMPANY
Income statement
for the year ending December31, 2018
Sales Revenue	8740
Les: Sales Discount	192
Net Sales	8548
Cost of goods sold	7155
Gross Profit	1393
Selling and administrative expenses	0
Net Income	1393
REDD COMPANY
Statement of changes in stockholders' equity
for the year ending December 31, 2018
Common stock		8100
Retained Earnings:
Balance as at Januray 1, 2018	3100
Net income for the year 2018	1393
Balance as at December 31, 2018		4493
Stockholders' equity as at December 31, 2018		12593
REDD COMPANY
Balance sheet
December 31, 2018
Assets
Cash	10293
Inventory	2300
Total Assets	12593
Liabilities and stockholders' equity
Liabilities	0
Stockholders' equity
common Stock	8100
Retained earnings	4493
Total Stockholder's equity	12593
Total liabilities and stockholders' equity	12593
REDD COMPANY
statement of cash flows
for the year ended December 31, 2018
Cash flow from operating activities
net income	1393
Adjustments for non-cash items in income statement	0
Adjustments for changes in working capital
Decrease in inventory	300
Net cash flow from operating activities	1693
Cash flow from investing activities	0
Cash flow from financing activities	0
Net cash flow	1693
Cash balance on january 1, 2018	8600
Cash balance on December 31, 2018	10293

Working:

REDD COMPANY
Trial Balance worksheet for the year ended December 31, 2018
Account	Beginning		Transactions		Adjusted		Income Statement		Balance Sheet
	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit	Debit	Credit
Cash	8600		9408	7715	10293				10293
Accounts Receivable			9600	9600	0				0
Inventory	2600		7220	7520	2300				2300
Accounts Payable			6100	6100		0				0
Common Stock		8100				8100				8100
Retaned Earnings		3100				3100				4493
Treasury Stock					0				0
Sales			860	9600		8740		8740
Sales discount			192		192		192
Cost of goods sold			7715	560	7155		7155
Income Summary							1393
Total	11200	11200	41095	41095	19940	19940	8740	8740	12593	12593