Exercise 4-12A (Algo) Effect of purchase returns and allowances and freight costs on the journal, ledger, and financial statements: Perpetual system LO 4-2, 4-4, 4-6 (The following information applies to the questions displayed below.) The trial balance for Terry's Auto Shop as of January 1, Year 2, follows: Cash Account Titles Inventory Common Stock Retained Earnings Total Debit $14,820 3,060 Credit $ 7,380 10,500 $ 17,880 $ 17,880 The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $4,150. 2. The goods in Event 1 were purchased FOB shipping point with freight cost $280 cash. 3. Returned $470 of damaged merchandise for credit on account. 4. Agreed to keep other damaged merchandise for which the company received an $205 allowance. 5. Sold merchandise that cost $2,590 for $13,600 cash 6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $150 cash. 7. Paid $2.910 on the merchandise purchased in Event 1. 8. Paid $8,640 cash for operating expenses. Cash Accounts Payable Beg. Bal 14,820 Beg. Bal 5a. 13,600 150 6. 3. 470 4,150 2,910 7. 205 8,640 8. 2,910 End. Bal 16,720 End. Bal 565 Inventory Common Stock Beg. Bal 3,060 Beg. Bal 7,380 4,150 205 4. 280 2,590 5b. End. Bal 4,695 End. Bal 7,380 Retained Earnings Sales Revenue Beg. Bal 10,500 Beg. Bal 13,600 5a. End. Bal 10,500 End. Bal 13,600 Cost of Goods Sold Transportation-out Beg. Bal 5b. 2,590 Beg. Bal 6. 150 End. Bal 2,590 End. Bal 150 Operating Expenses Beg Bal B. 8,640 End. Bal 8,640 27