At the beginning of Year 2 the Redd Company had the following balances in its accounts. Cash Inventory Land Common stock Retained earnings $14,380 6,500 3,400 12,000 12.200 During Year 2, the company experienced the following events: 1. Purchased Inventory that cost $12.600 on account from Ross Company under terms 2/10, 1/30. The merchandise was delivered FOB shipping point. Freight costs of $940 were paid in cash. 2. Returned $650 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 $11,000 for $19.000 on account, under terms 2/10, 1/45 5. Received merchandise returned from a customer . The merchandise originally cost $1.900 and was sold to the customer for $2.500 cash The customer was paid $2,500 cash for the returned merchandise 6. Delivered goods FOB destination in Event 4 Freight costs of 5830 were paid in cash 7. Collected the amount due on the account receivable within the discount period 8. Sold the land for $6,300 9. Recognized accrued interest income of $400 10. Took a physical count indicating that $4,500 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 (AB), 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 Parte. 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. Req A Req B Regc Req 01 Reg D2 Reg D3 Reg D4 Reg E1 Reg E2 Identify each of these events as asset source (AS), asset use (AU). asset exchange (AE), or claims exchange (CE). Also explain how each avent 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. (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 REDD COMPANY Effect of Events on the Financial Statements for Year 2 Balance Sheet Event Income Statement Event No Type Statement of Cash Flows Assets Liabilities Stockholders Equity Revenue Expenses Net Income AS Tb AE 2 30 G 45 5a 56 Ta Journal entry worksheet Record the entry for freight cost paid in cash. Note: Enter debits before credits. Event General Journal Debit Credit 1b Record entry Clear entry View general journal Journal entry worksheet O .... Record the entry for return of inventory that was damaged in transit. Note: Enter debits before credits. Event General Journal Debit Credit 02 Record entry Clear entry View general journal Journal entry worksheet Record entry for discount on inventory purchased. Note: Enter debits before credits. Event General Journal Debit Credit 3a View general journal Record entry Clear entry View transaction list Journal entry worksheet Record the entry for cash paid for accounts payable. Note: Enter debits before credits. Event General Journal Debit Credit 3b Record entry Clear entry View general journal Record entry for return of merchandise sold. Note: Enter debits before credits. Event General Journal Debit Credit 5a Record entry Clear entry View eral journal View transaction list Journal entry worksheet Req A Req B Reqc Req D1 Req D2 Req D3 Req D4 Req Prepare a multistep income statement for Year 2. REDD COMPANY Income Statement For the Year Ended December 31, Year 2 Operating expenses Nonoperating items h Complete this question by entering your answers in the tabs below. Req A Req B Reqc Reg D1 Redo2 Reg D3 Reg D4 Req E1 Req E 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 Total stockholders' equity Next Req A Req B Reg C Req D1 Req D2 Req D3 Req D4 Req E1 Reg Prepare a balance sheet for Year 2. REDD COMPANY Balance Sheet As of December 31, Year 2 Assets Total assets Liabilities Stockholders' Equity Total stockholders' equity Total liabilities and stockholders' equity Prey 4 of 4 !!! Next Req D2 Req D3 Req D4 Req Prepare a statement of cash flows for Year 2. (Cash outflows should be indicated with a minus REDD COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from operating activities: h Net cash flow from operating activities Cash flows from investing activities: Cash flows from financing activities: Ending cash balance ISL Journal entry worksheet