Powell Company began the Year 3 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. During Year 3, Powell experienced
Powell Company began the Year 3 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. During Year 3, Powell experienced the following events:
- Sold merchandise costing $58,000 for $99,500 on account to Prentise Furniture Store.
- Delivered the goods to Prentise under terms FOB destination. Freight costs were $900 cash.
- Received returned goods from Prentise. The goods cost Powell $4,000 and were sold to Prentise for $5,900.
- Granted Prentise a $3,000 allowance for damaged goods that Prentise agreed to keep.
- Collected partial payment of $81,000 cash from accounts receivable.
Required
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Record the events in a statements model shown below.
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Prepare an income statement, a balance sheet, and a statement of cash flows.
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Why would Prentise agree to keep the damaged goods?
Powell Company began the Year 3 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. During Year 3, Powell experienced the following events: 1. Sold merchandise costing $58,000 for $99,500 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $900 cash. 3. Received returned goods from Prentise. The goods cost Powell $4,000 and were sold to Prentise for $5,900. 4. Granted Prentise a $3,000 allowance for damaged goods that Prentise agreed to keep. 5. Collected partial payment of $81,000 cash from accounts receivable. Required a. Record the events in a statements model shown below. b. Prepare an income statement, a balance sheet, and a statement of cash flows. c. Why would Prentise agree to keep the damaged goods? Record the events in a statements model shown below. (Enter any decreases to account balances and cash outflows with a minus sign. In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, or NC for net change cash. If the account is not affected by the event, leave the cell blank. Not every cell will require entry.) Show less Event No. Statement of Cash Flows Cash Bal. 40,000 + + 1a 0 0 1b. 0 POWELL COMPANY Financial Statements Model For Year 3 Assets Stockholders' Equity Income Statement Accounts Retained Common Net + Inventory = Revenue Receivable Expenses = Stock Earnings Income 86,000 = 60,000 + 66,000 0 + (58,000) 0 + (58,000) 01 - 58,000 = (58,000) 99,500 + 0 0 + 99,500 99,500 0 = 99,500 0 + 0 0 + (900) 0 900 = (900) 0 + 4,000 = 0 + 4,000 0 (4,000) = 4,000 (5,900) + 0 = 0 + (5,900) (5,900) 0 = (5,900) (3,000) + 0 = 0 + (3,000) (3,000) - 0 = (3,000) (81,000)| + 0= 0 + 0 0 0 = 0 9,600 + 32,000 = 60,000 + 101,700 90,600 54,900 = 35,700 0 (900) OA 2. (900) + . 0 + 0 3b Ol + 0 4. 0 + 0 5. 81,000 + 120,100 81,000 OA 80,100 Total Prepare an income statement for Powell Company.. POWELL COMPANY Income Statement For the Year Ended December 31, Year 3 $ 99,500 Cost of goods sold (8,900) Gross margin 90,600 Operating expenses Transportation-out (54,000) Net income 36,600 $ Prepare a balance sheet for Powell Company. POWELL COMPANY Balance Sheet As of December 31, Year 3 Assets Cash $ 120,100 Accounts receivable 9,600 Merchandise inventory 32,000 $ 161,700 Total assets Liabilities Stockholders' equity Common stock Retained earnings $ 60,000 101,700 161,700 Total stockholders' equity Total liabilities and stockholders' equity $ 161,700
