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: The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $4,140. 2. The goods in Event 1 were purchased FOB shipping point with freight cost of $245 cash. 3. Returned $435 of damaged merchandise for credit on account. 4. Agreed to keep other damaged merchandise for which the company received an $210 allowance. 5. Sold merchandise that cost $2,710 for $13,900 cash. 6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $105 cash. 7. Paid $2,870 on the merchandise purchased in Event 1. 8. Paid $8,540 cash for operating expenses. Journal entry worksheet Record entry for purchase of merchandise on account. Note: Enter debits before credits. b. Open general ledger T-accounts with the appropriate beginning balances,'and post the journal entries to the T-accounts. c. Prepare a multistep income statement, balance sheet, and statement of cash flows. (Assume that closing ent Complete this question by entering your answers in the tabs below. Prepare an income statement. TERRY'S AUTO SHOP Balance Sheet As of December 31, Year 2 cos Prepare a statement of cash flows. (Assume that closing entries have been made.) (Cash minus sign.)