At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $8,700 2,700 8,200 3,200 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $6,200 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $570 were paid in cash. 2. Returned $300 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 Ross Company within the cash discount period. 4. Sold inventory that had cost $6,700 for $9,700 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $570 and was sold to the customer for $870 cash. The customer was paid $870 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $670 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $2,400 of inventory was on hand at the end of the accounting period. Prepare a multistep income statement. REDD COMPANY Income Statement For the Year Ended December 31, Year 2 Operating expenses Prepare a statement of changes in stockholders' equity. REDD COMPANY Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 Beginning common stock Ending common stock Beginning retained earnings Ending retained earnings Total stockholders' equity Prepare a balance sheet. REDD COMPANY Balance Sheet As of December 31, Year 2 Assets Total assets Liabilities Stockholders' Equity Total stockholders' equity Total liabilities and stockholders' equity Prepare a statement of cash flows. (Cash outflows should be indicated with a minus sign.) REDD COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flows from operating activities Net cash flow from operating activities Cash flows from investing activities: Cash flows from financing activities: Net change in cash Ending cash balance