1. Purchased inventory that cost $12,700 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $950 were paid in cash. 2. Returned $700 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 $10,000 for $19,000 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $1,950 and was sold to the customer for $2,600 cash. The customer was paid $2,600 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $840 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Sold the land for $6,500. 9. Recognized accrued interest income of $450. 10. Took a physical count indicating that $4,600 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. Required: a. Identify each of these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event would affect the financial statements by placing a + for increase. - for decrease, and +/- for increase and decrease under each of the components in the following statements model. Assume that the perpetual inventory method is used. When an event has more than one part, use letters to distinguish the effects of each part. The first event is recorded as an example. b. Record the events in general journal format. Assume that the perpetual inventory method and gross method is used c. Post the beginning balances and the events to the T-accounts. Note that these ledger accounts will also be used when posting the closing entry that is created in Part e d. Prepare a multistep income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flows for Year 2 < Prev 4 of 7 Next > CHECK Req A Req B Req C Req D1 Req D2 Req D3 Prepare a multistep income statement for Year 2. REDD COMPANY Income Statement For the Year Ended December 31, Year 2 Operating expenses Nonoperating items 0 LA 0 13 Req A Req B Req C Req D1 Req D2 Req D3 Req D4 Prepare a statement of changes in stockholders' equity for Year 2. REDD COMPANY Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 SA $ 0 0 Total stockholders' equity $ 0 < Req D1 Req D3 > es Assets Total assets Liabilities Stockholders' Equity Balance Sheet As of December 31, Year 2 Total stockholders' equity Total liabilities and stockholders' equity GA $ 0 $ 0 < Req D2 0 Req D4 > Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from operating activities: Net cash flow from operating activities Cash flows from investing activities: Cash flows from financing activities: Ending cash balance < Req D3 $ 0 0 $ 0 Req E1 > Journal entry w < 1 Record entry to close all revenue, gain, and expense accounts to the retained earnings account. Note: Enter debits before credits. Date Dec 31 General Journal Debit Credit Record entry Clear entry View general journal > Req A Req B Req C Req D1 Req D2 Req D3 Post the journal entry to the ledger accounts and prepare a post-closing trial E REDD COMPANY Post Closing Trial Balance December 31, Year 2 Account Titles Debit Credit Total $ 0 $ 0 < Req E1 Reg >