At the beginning of Year 2, the Redd Company had the following balances in its accounts. Cash Inventory Land Connon stock $ 6,900 15,000 7,000 15,000 Retained earnings 13,900 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,200 on account from Ross Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $190 were paid in cash. 2. Returned $400 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 $6,800 for $12.100 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $900 and was sold to the customer for $1,680 cash. The customer was paid $1.680 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $140 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Sold the land for $8,500. 9. Recognized accrued interest income of $600. 10. Took a physical count indicating that $13,400 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. Deulend 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. e. Use a single general journal entry to close all revenue, gain, and expense accounts to the retained earnings account. Post the journal entry to the ledger accounts and prepare a post-closing trial balance. diell ure nantial statements uy pracy auteur verease, d / Use and create une au un components R 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. (In the Statement of Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, and FA for financing activity.) Show less a REDD COMPANY Effect of Events on the Financial Statements for Year 2 Balance Sheet Event No. Event Income Statement Statement of Type Assets Liabilities + Stockholders' Equity Revenue Expenses Net Income Cash Flows 1a AS 1b 22 + AE +/- OA 2 38 3b 4a 4b. ba 56 0 78 7b 8 9 10 Prev 1 of 1 Next View transaction list Journal entry worksheet < A B C D E F G H Record the entry for inventory purchased on account from Ross company under terms 1/10, n/30. Note: Enter debits before credits. Event 1a General Journal Debit Credit Record entry Clear entry View general journal CIOsing entry that is created in part e. Beg. Bal. Cash End. Bal Accounts Receivable Beg. Bal. End Bal. Inventory Beg. Bal. End. Bal End. Bal. Interest Receivable Beg. Bal. End. Bal. Land Accounts Payable Beg. Bal Beg Bal End. Bal End. Bal. Prev 1 of 1 Next End Bal Common Stock Beg. Bal End. bal. Beg Bal Retained Earnings End Bal End Bal. Sales Revenue Cost of Goods Sold es Beg Bal Beg Bal End Bal End. Bal Transportation-out Interest Revenue Beg Bal Beg Bal End. Bal Gain on Sale of Land End Bal Prepare a multistep income statement for Year 2. REDD COMPANY Income Statement For the Year Ended December 31, Year 2 Net sales Cost of goods sold Gross margin Operating expenses Transportation-out Operating income Nonoperating items Interest revenue Gain on sale of land Net income $ 9,760 5,900 3,860 EA $ 140 3,720 600 1,500 5,820 < Reg C Prepare a statement of changes in stockholders' equity for Year REDD COMPANY Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 Beginning common stock $ 15,000 Plus: Stock issued 0 Ending common stock $ 15,000 Beginning retained earnings $ 13,900 Plus: Net income 5,820 Ending retained earnings Total stockholders' equity 19,720 $ 34,720 Prepare a balance sheet for Year 2. REDD COMPANY Assets Cash Inventory Interest receivable Total assets Liabilities Stockholders' Equity Common stock Retained earnings Total stockholders' equity Balance Sheet As of December 31, Year 2 Total liabilities and stockholders' equity $ 19,880 14,240 600 $ 15,000 19,720 $ 34,720 34,720 $ 34,720 < Req D2 Req D < Prev Prepare a statement of cash flows for Year 2. (Cash outflows should be REDD COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from operating activities: Net cash flow from operating activities $ 0 Cash flows from investing activities: Cash flows from financing activities: Ending cash balance 0 $ 0 < Reg D3 Journal entry worksheet 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 > REDD COMPANY Post Closing Trial Balance December 31, Year 2 Account Titles Cash Cash Operating expense Operating expense Total S Debit Credit 0 $ 0 < Req E1