Exercise 3-7 Effect of purchase returns and allowances and freight costs on the financial statements: Perpetual system LO 3-2 The following information applies to the questions displayed below.j The beginning account balances for Austin's Auto Shop as of January 1, 2014, follows: Account Titles Beginning Balances $6.000 Cash Inventory 3.000 7.500 Common stock Retained earnings 500 The following events affected the company during the 2014 accounting period 1. Purchased merchandise on account that cost $4.100. 2. The goods in Event 1 were purchased FOB shipping point with freight cost of $300 cash 3. Returned $500 of damaged merchandise for credit on account. 4. Agreed to keep other damaged merchandise for which the company received an $250 allowance. 5. Sold merchandise that cost $2,750 for$4,750 cash. 6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $200 cash. 7 Paid $3,000 on the merchandise purchased in Event 1