At the beginning of Year 2, the Redd Company had the following balances in its occounts. During Year 2, the company experienced the following events: 1. Purchased inventory that cost 512,700 on account from Ross Company under terms 2%0,1/30. The merchandise was delivered FOQ shipping paint. Freight costs af $950 were pric in cesh. 2. Retumed $700 of the inventory it had purchased because the imventory was damsged in transit. The seller agreed to poy the return freight cost. 3. Paid the amcunt due on its account paygble to Ross Company within the cash discaunt period. 4. Sold inventory that had cost $10000 for $19,000 on account, under terms 2i10. ni45, 5. Received merchancise retumeo trom a customer. The merchandise originally cost $1,950 and was sold to the customer for $2,600 cesh. The customer was peid $2,600 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4 . Freight ensts of $940 were paid in cash, 7. Collected the amount due on the account receivable within the dliscount perioct. 8 . Sold the land for $6,500. 9. Recognized necrued interest inenres of $450. 10. Took a physical count indlcating that $4,600 of inventory was on hand at the end of the accounting period. Aint Determine the current balance in the inventory account before calculating the amount of the inventory write down. Required: a. Identfy each of these events as asset source (AS|, asset use {AU, asset exchange (AE), or clai ins exchange {CE. Also explain how each event would affect the finencial statements by placing a + for increase, for decreese, and +i for increase and cecrease under each of the components in the follewing statements model. Assume that the perpetual inwentory method is used. When an event has more than one part, use letters to distingulsh the effects of each part. The first event is recorcled as an example. b. Record the events in general joumal formet. Assume that the perpetual inventory method and gross method is used. c. Post the beginning bulareses arid the ewents to the T-nccounts. Note that these lindger arenunts will also be used when postirig the closing entry that is created in Part e. d. Prepare a multisteo income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flaws far Year 2. e. Use a single general joumal enty to close all revenue, soin, and expense accounts to the retained earnings occount. Post the journal entry to the ledger accounts and prepare a post-closing trial balance. At the beginning of Year 2, the Redd Company had the following balances in its occounts. During Year 2, the company experienced the following events: 1. Purchased inventory that cost 512,700 on account from Ross Company under terms 2%0,1/30. The merchandise was delivered FOQ shipping paint. Freight costs af $950 were pric in cesh. 2. Retumed $700 of the inventory it had purchased because the imventory was damsged in transit. The seller agreed to poy the return freight cost. 3. Paid the amcunt due on its account paygble to Ross Company within the cash discaunt period. 4. Sold inventory that had cost $10000 for $19,000 on account, under terms 2i10. ni45, 5. Received merchancise retumeo trom a customer. The merchandise originally cost $1,950 and was sold to the customer for $2,600 cesh. The customer was peid $2,600 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4 . Freight ensts of $940 were paid in cash, 7. Collected the amount due on the account receivable within the dliscount perioct. 8 . Sold the land for $6,500. 9. Recognized necrued interest inenres of $450. 10. Took a physical count indlcating that $4,600 of inventory was on hand at the end of the accounting period. Aint Determine the current balance in the inventory account before calculating the amount of the inventory write down. Required: a. Identfy each of these events as asset source (AS|, asset use {AU, asset exchange (AE), or clai ins exchange {CE. Also explain how each event would affect the finencial statements by placing a + for increase, for decreese, and +i for increase and cecrease under each of the components in the follewing statements model. Assume that the perpetual inwentory method is used. When an event has more than one part, use letters to distingulsh the effects of each part. The first event is recorcled as an example. b. Record the events in general joumal formet. Assume that the perpetual inventory method and gross method is used. c. Post the beginning bulareses arid the ewents to the T-nccounts. Note that these lindger arenunts will also be used when postirig the closing entry that is created in Part e. d. Prepare a multisteo income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flaws far Year 2. e. Use a single general joumal enty to close all revenue, soin, and expense accounts to the retained earnings occount. Post the journal entry to the ledger accounts and prepare a post-closing trial balance
