The trial balance for Jerry's Auto Shop as of January 1, 2011 follows:

The following events affected the company during the 2011 accounting period:
1. Purchased merchandise on account that cost \(\$ 18,000\).
2. The goods in Event 1 were purchased FOB shipping point with freight cost of \(\$ 1,000\) cash.
3. Returned \(\$ 3,600\) of damaged merchandise for credit on account.
4. Agreed to keep other damaged merchandise for which the company received a \(\$ 1,400\) allowance.
5. Sold merchandise that cost \(\$ 16,000\) for \(\$ 34,000\) cash.
6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to \(\$ 800\) cash.
7. Paid \(\$ 12,000\) on the merchandise purchased in Event 1.

Required

a. Record the events in general journal format.

b. Open general ledger \(\mathrm{T}\)-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. (Assume that closing entries have been made.)

d. Explain why a difference does or does not exist between net income and net cash flow from operating activities.

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Account Titles Debit Credit Cash $28,000 Inventory 14,000 Common stock $36,000 Retained earnings 6,000 Total $42,000 $42,000