At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $7,700 1,700 7,200 2,200 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,200 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $470 were paid in cash. 2. Returned $400 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 $5,700 for $8,700 on account, under terms 2/10, n/45. 5. Received merchandise ret ned from a customer. The merchandise originally cost $470 and was sold to the customer for $770 cash. The customer was paid $770 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $570 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $1,400 of inventory was on hand at the end of the accounting period. s b. Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. The first event is recorded as an example. (Not every cell will require entry. Enter any decreases to account balances and cash outflows with a minus sign.) Event Bal. 1a. 1b. 2. 3. 4a 4b. 5a. 5b. 6. 7. 8. Bal Cash 7,700+ (470) Assets Accounts Receivable * . $ 7,230- $ + . * Merchandise Inventory . 0 Balance Sheet 1,700 5,200 (400) REDD COMPANY Horizontal Statements Model Year 2 Liabilities+ Stockholders' Equity Accounts Common Retained Revenue Payable Stock Earnings 2,200 + 5,200+ + (400)+ 7,200 + $ 6,500 $4,800 $ 7,200 + (470) $ 1,730 S Income Statement 0 Expenses (470) $ (470) - Net Income (470) Statement of Cash Flows (470) OA $ (470) S (470)