Exercise 3-7 Effect of purchase returns and allowances and freight costs on the financial statements: Perpetual system L3.2 The following information applies to the questions displayed below The beginning account belances for Austin's Auto Shop as of January 1,2014, follows $12,000 9,000 13500 7,500 Cash Common stock Retained earnings The following events affected the company during the 2014 accounting period 1 Purchased merchandise on account that cost $12,300 2. The goods in Event 1 were purchased FOB shipping point with freight cost of $860 cash. 3. Returned $1,480 of damaged merchandise for credit on account 4 Agreed to keep other damaged merchandise for which the company received an $740 allowance. 5. Sold merchandise that cost $8,310 for $14,380 cash 6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $580 cash Paid $9,000 on the merchandise purchased in Event 1 7