Exercise 3-16A (Algo) Effect of sales returns and allowances and freight costs on the financial statements: Perpetual system LO 3-2, 3-3, 3-4, 3-6, 3-7 Powell Company began the Year 3 accounting period with $43,000 cash, $89,000 inventory, $63,000 common stock, and $69,000 retained earnings. During Year 3, Powell experienced the following events: 1. Sold merchandise costing $59,500 for $102,500 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,000 cash. 3. Received returned goods from Prentise. The goods cost Powell $4,300 and were sold to Prentise for $6,400 4. Granted Prentise a $3,300 allowance for damaged goods that Prentise agreed to keep, 5. Collected partial payment of $83,500 cash from accounts receivable. Required a. Record the events in a statements model shown below. b. Prepare an income statement, a balance sheet, and a statement of cash flows. c. Why would Prentise agree to keep the damaged goods?