(LO4-1, 4-2, 4-4, 4-6) 4 ! Required information Saved Part 1 of 3 14.28 points [The following information applies to the questions displayed below.] The beginning account balances for Terry's Auto Shop as of January 1, Year 2, follow: Account Titles Cash Inventory Common Stock Retained Earnings Beginning Balances $6,010 3,070 7,380 1,700 eBook The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $4,180. Hint 2. The goods in Event 1 were purchased FOB shipping point with transportation cost of $265 cash. 3. Returned $415 of damaged merchandise. Print 4. Agreed to keep other damaged merchandise for which the company received a $205 allowance. 5. Sold merchandise that cost $2,720 for $4,880 cash. 6. Delivered merchandise to customers in Event 5 under terms FOB destination with transportation costs amounting to $140 cash. 7. Paid $2,850 on the merchandise purchased in Event 1. Help Save & Exit Submit Required a. Organize appropriate 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 input neededs for the Retained Earnings amounts. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Earnings" column may require an input- leave cells blank if there is no corresponding Retained Earnings input needed.) Check my work b. Prepare an income statement and a statement of cash flows for Year 2. (Assume that closing entries have been made.) Complete this question by entering your answers in the tabs below. Terry Inc Stmt Terry Stmt CF Prepare an income statement. TERRY'S AUTO SHOP Income Statement For the Year Ended December 31, Year 2 Operating expenses 0 0 b. Prepare an income statement and a statement of cash flows for Year 2. (Assume that closing entries have been made.) Complete this question by entering your answers in the tabs below. Terry Inc Stmt Terry Stmt CF Prepare a statement of cash flows. (Cash outflows should be indicated with a minus sign.) TERRY'S AUTO SHOP Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from operating activities Net cash flow from operating activities Cash flows from investing activities $ 0 Cash flows from financing activities Net change in cash Ending cash balance 0 0 c. Explain why a difference exists between net income and net cash flow from operating activities. Multiple Choice The difference between net income and cash flow from operating activities is because not all of the inventory that has been sold was paid for. The difference between net income and net cash flow from operating activities exists because of maintaining the inventory records using the perpetual inventory system. The difference between net income and net cash flow from operating activities exists because operating expenses are not required to be accounted for when determining net income