At the beginning of 2018, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $8,400 2,400 7,900 2,900 During 2018, the company experienced the following events: 1. Purchased inventory that cost $5,900 on account from Redd Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $540 were paid in cash. 2. Returned $400 of the inventory that 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 Redd Company within the cash discount period. 4. Sold inventory that had cost $6,400 for $9,400 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $540 and was sold to the customer for $840 cash. The customer was paid $840 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $640 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $2,100 of inventory was on hand at the end of the accounting period. Income Statement Event Assets Accounts Receivable REDD COMPANY Horizontal Statements Model - 2018 Balance Sheet = Liabilities + Stockholders' Equity Merchandise Accounts Common Retained Inventory Payable Stock Earnings 2,400 = 7,900 + 2,900 5,900 = 5,900 + Statement of Cash Flows Revenue Net Income - Expenses = + Cash 8,400 Bal. 1a. + + 1b. (540) + + + (540) (540)| (540) OA (400) + 400) + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + Bal. $ 7,860 + $ 0 + $ 7,900 = $ 5,500 + $ 7,900 + $ 2,900 $ 0 - $ (540) = $ (540) $ (540)