Required information Exercise 3-7A (Static) Effect of purchase returns and allowances and freight costs on the financial statements: Perpetual system LO 3-2, 3-3, 3-4 [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 $16,000 8,000 20,000 4,000 The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $15,000. 2. The goods in Event 1 were purchased FOB shipping point with freight cost of $800 cash. 3. Returned $2,600 of damaged merchandise for credit on account. 4. Agreed to keep other damaged merchandise for which the company received a $1,100 allowance. 5. Sold merchandise that cost $15,000 for $31,000 cash. 6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $500 cash. 7. Paid $8,000 on the merchandise purchased in Event 1. Required a. 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. (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.) Events Beg. Bal. 1. Cash Assets + Inventory TERRY'S AUTO SHOP Effect of Events on the Financial Statements =Liabilities 44 Accounts Payable Stockholders' Equity Common Stock IN 2. + = + 3. 4. + 5a. 5b. 6. 7. End Bal. 0 0 0+ + 0+ Retained Accounts Titles for Retained Earnings Earnings 0