Question

In: Accounting

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

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

Cash $ 8,000
Inventory 2,000
Common stock 7,500
Retained earnings 2,500


During Year 2, the company experienced the following events:

  1. Purchased inventory that cost $5,500 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $500 were paid in cash.
  2. Returned $350 of the inventory it had purchased 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 $6,000 for $9,000 on account, under terms 2/10, n/45.
  5. Received merchandise returned from a customer. The merchandise originally cost $500 and was sold to the customer for $800 cash. The customer was paid $800 cash for the returned merchandise.
  6. Delivered goods FOB destination in Event 4. Freight costs of $600 were paid in cash.
  7. Collected the amount due on the account receivable within the discount period.
  8. Took a physical count indicating that $1,700 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.

put each of these in Schedule.

Solutions

Expert Solution

Ans-REDD COMPANY

Horizontal Statements Model-Year 2

Balance Sheet Income Statement Statement of Cash Flows
Event Assets = Liabilities + Stockholders' Equity
Cash + Accounts Receivable + Merchandise Inventory = Accounts Payable + Common Stock + Retained Earnings Revenue - Expenses = Net Income
Bal. $8,000 + + $2,000 = + $7,500 + $2,500 - = NA
1 a. + + 5,500 = 5,500 + + - = NA
1 b. -500 + + 500 = + + - = -500 OA
2 + + -350 = -350 + + - = NA
3 -5,047 + + -103 = -5,150 + + - = -5,047 OA
4 a. + 9,000 + = + + 9,000 9,000 - = 9,000 NA
4 b. + + -6,000 = + + -6,000 - 6,000 = -6,000 NA
5 a. -800 + + = + + -800 -800 - = -800 -800 OA
5 b. + + 500 = + + 500 - -500 = 500 NA
6 -600 + + = + + -600 - 600 = -600 -600 OA
7 8,820 + -9,000 + = + + -180 -180 - = -180 8,820 OA
8 + + -347 = + + -347 - 347 = -347 NA
Balances $9,873 + 0 + $1,700 = 0 + $7,500 + $4,073 $8,020 - $6,447 = $1,573 $1,873 NC

Assets

$11,573

 =

Liabilities

$0

 +

Stockholders' Equity

$7,500+$4,073

=$11,573

ekkarill92 answered 2 years ago
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