At the beginning of Year 2, the Redd Company had the following balances in its accounts. Cash Inventory Land Common stock Retained earnings $13,300 5,500 3,200 10,000 12,000 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $12,400 on account from Ross Company under terms 2/10,n/30. The merchandise was delivered FOB shipping point. Freight costs of $920 were paid in cash the responsible party 2. Returned $550 of the inventory it had purchased because the inventory was damaged in transit. The seller agreed to pay the return freight cost. 3. Pald the amount due on its account payable to Ross Company within the cash discount period. 4. Sold inventory that had cost $10,000 for $18,000 on account, under terms 2/10,n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $1,800 and was sold to the customer for $2,300 cash. The customer was paid $2,300 cash for the returned merchandise 6. Delivered goods FOB destination in Event 4. Freight costs of $810 were paid in cash by the responsible party 7. Collected the amount due on the account receivable within the discount period. 8. Sold the land for $5,900 9. Recognized accrued interest income of $300. 10. Took a physical count indicating that $4,300 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. 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, and a balance sheet 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. Complete this question by entering your answers in the tabs below. Req A Red B Reqc Reg D1 Reg D2 Reg D3 Reg E1 Req E2 Record the events in general Journal format. Assume that the perpetual Inventory method and gross method is used. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Identify each of these events as asset source (AS), asset use (AU), asset exchange (AE), orns exchange (CE). Also explain how each event would affect the financial statements by placing a + for increase, - for decrease, and +/- for crease and decrease under each of the components in the following statements model. Assume that the perpetual Inventory meth 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 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 Your 2 Balance Sheet Income Statement Stockholders Not Liabilities + Revenue - Expenses Equity Income Event No. Statement of Cash Flows Assets ta 1b - 2 311 3b 4a Ab 50 5b 6 7a 7b B 9 10 RegB> Record the events in general journal format. Assume that the perpetual Inventory method and gross method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Complete this question by entering your answers in the tabs below. Req A Req B Reg C Reg D1 Req D2 Reg D3 Req E1 Req E2 Prepare a balance sheet for Year 2. REDD COMPANY Balance Sheet As of December 31, Year 2 Assets $ 0 Total assets Liabilities Stockholders' Equity Total stockholders' equity Total liabilities and stockholders' equity 0 0 $ Use a single general journal entry to close all revenue, gain, and expense accounts to retained earnings account. (If no entry is required for a transaction/event, select "No journal entry required in the first accould.) View transaction list Journal entry worksheet
