Exercise 3-7A (Algo) Effect of purchase returns and allowances and freight costs on the financial statements: Perpetual system LO 3-2, 3-3, 3-4

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The beginning account balances for Terrys Auto Shop as of January 1, Year 2, follow:

Account Titles	Beginning Balances
Cash	$ 6,180
Inventory	3,010
Common Stock	7,430
Retained Earnings	1,760

The following events affected the company during the Year 2 accounting period:

1. Purchased merchandise on account that cost $4,290.

The goods in Event 1 were purchased FOB shipping point with freight cost of $215 cash.

Returned $485 of damaged merchandise for credit on account.

Agreed to keep other damaged merchandise for which the company received a $295 allowance.

Sold merchandise that cost $2,560 for $4,780 cash.

Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $130 cash.

Paid $2,970 on the merchandise purchased in Event 1.

Organize appropriate ledger accounts under an accounting equation. Record the beginning balances and the transaction data in the accounts. In the last column of the table, provide appropriate account titles for the Retained Earnings amounts.

Note: Enter any decreases to account balances with a minus sign. If there is no effect on the Accounts Titles for Retained Earnings, leave the cell blank. Not every cell will require entry.