At the beginning of Year 2, the Redd Company had the following balances in its accounts. During Year 2, the company experienced the following events: 1. Purchased inyentory that cost $13,000 on account from Ross Compeny urider terms 2/10,n/30. The merchandise was delvered FOB shipping point, Freight costs of $980 were paid in cash. 2. Returned $850 of the inventory it had purchased becaune the inventoy was damaged in transit. The seller agreed to poy the return freight cost. 3. Paid the amount due on its account payable to Ross Comfany witwin the cash discount period. 4. Sold inventory that had cost $12,000 for $21,000 on account, under terms 2/10, n/45: 5. Received merchandse returned from a customer. The merchancise originally cost $2.100 and was soid to the customer for $2,900 cash. The customer was paid $2,900 cash for the returned merchondise. 6. Delivered goods FOH destination in Event 4 . Freight costs of $870 were peid in cash. 7. Coliected the amount due on the occount receivable within the dicount period. 8. Sold the land for $7,100. 9. Recognized occrued interest income of $600. 10. Took a physical count indicating that $5,000 of inventory was on hand at the end of the accounting period, Hint Determine the current belance in the inventacy account before celculating the amount of the irventory write down. 6. Dellvered goods FOB destination in Event 4. Freight costs of $870 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Sold the land for $7,100. 9. Recognized accrued interest income of $600. 10. Took a physical count indicating that $5,000 of inventory was on hand at the end of the occounting period. Hint Determine the current balance in the inventory account before calculating the amount of the inventory write down. Required: a. Identify esch 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 piacing a + for increased, for decrease, and 4/= for increase and decrease under eoch of the components in the following statements model. Assume that the perpetial 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 joumal 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 wilt 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 ittockholders' equity a balance sheet and a statement of cash flows for Year 2 e. Use a single generaljournal entry to close all revenue, gain, and expense accounts to the retained eamings account. Post the joumal entry to the ledger accounts and prepare o post closing trial balance. Complete this question by entering your answers in the tabs below
