Question
In: Accounting
Powell Company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and...
Powell Company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. During 2018, Powell experienced the following events:
1.Sold merchandise costing $58,000 for $99,500 on account to Prentise Furniture Store.
2.Delivered the goods to Prentise under terms FOB destination. Freight costs were $900 cash.
3.Received returned goods from Prentise. The goods cost Powell $4,000 and were sold to Prentise for $5,900.
4.Granted Prentise a $3,000 allowance for damaged goods that Prentise agreed to keep.
5.Collected partial payment of $81,000 cash from accounts receivable.
Required
a.Record the events in a statements model shown below.
b.Prepare an income statement, a balance sheet, and a statement of cash flows.
c. Why would Prentise agree to keep the damaged goods?
(Enter any decreases to account balances and cash outflows with a minus sign. In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, and NA for no affect.)
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Prepare an income statement for Powell Company.
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Prepare a balance sheet for Powell Company.
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Prepare a statement of cash flows for Powell Company. (Amounts to be deducted should be indicated with minus sign.)
Why would Prentise agree to keep the damaged goods? (Select which of the following statements (is) are true by selecting an "X".)
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Solutions
Expert Solution
| POWELL COMPANY | ||||||||||||||||
| Financial Statements Model for 2018 | ||||||||||||||||
| Event No. | Assets | = | Stockholders’ Equity | Income Statement | Statement of Cash Flows | |||||||||||
| Cash | + | Accounts Receivable | + | Inventory | = | Common Stock | + | Retained Earnings | Revenue | – | Expenses | = | Net Income | |||
| Bal. | 40000 | + | + | 86000 | = | 60000 | + | 66000 | – | = | ||||||
| 1a. | + | 99500 | + | = | = | 99500 | 99500 | – | 0 | = | 99500 | NA | ||||
| 1b. | -58000 | -58000 | 58000 | -58000 | Na | |||||||||||
| 2 | -900 | + | + | = | + | -900 | – | 900 | = | -900 | OA | |||||
| 3a. | -5900 | -5900 | -5900 | -5900 | NA | |||||||||||
| 3b. | 4000 | 4000 | -4000 | 4000 | NA | |||||||||||
| 4 | + | -3000 | + | = | + | -3000 | -3000 | – | = | -3000 | NA | |||||
| 5 | 81000 | + | -81000 | + | = | + | – | = | ||||||||
| Total | 120100 | 0 | 9600 | 32000 | 60000 | 101700 | 90600 | 54900 | 35700 | |||||||
| POWELL COMPANY | ||
| Income Statement | ||
| For the Year Ended December 31, 2018 | ||
| Sales | ||
| Gross sales | 99500 | |
| Less: Sales return & allowances | -8900 | |
| Net sales | 90600 | |
| Less: Cost of good sold (58000-4000) | 54000 | |
| Less: freight out | 900 | |
| Net Incme | 35700 | |
| Prepare a balance sheet for Powell Company. | ||
| POWELL COMPANY | ||
| Balance Sheet | ||
| As of December 31, 2018 | ||
| Assets | ||
| Cash | 120100 | |
| Accounts receivable | 9600 | |
| Merchandise inventory | 32000 | |
| Total assets | 161700 | |
| Liabilities | ||
| Stockholders’ equity | ||
| Common stock | 60000 | |
| Retained earnings | 101700 | |
| Total stockholders' equity | 161700 | |
| Total liabilities and stockholders' equity | 161700 | |
| statement of cash flows for Powell Company. | ||
| POWELL COMPANY | ||
| Statement of Cash Flows | ||
| For the Year Ended December 31, 2018 | ||
| Cash flow from operating activities | ||
| Cash received from cutomers | 81000 | |
| Cash paid for frieght out | -900 | |
| Net cash flow from operating activities | 80100 | |
| Cash flows from investing activities | 0 | |
| Cash flows from financing activities | 0 | |
| Net change in cash | 80100 | |
| Beginnning balance | 40000 | |
| Ending cash balance | 120100 | |
| ans 4 | ||
| Get goods at reduced cost. | TRUE | |
| Can resell the damaged goods. | TRUE | |
| If any doubt please comment | ||
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