Required information 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: Account Titles Cash Inventory Common Stock Retained Earnings Total Debit $14,820 3,060 Credit $ 17,880 $ 7,380 10,500 $ 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 of $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 Print References c. Prepare a multistep income statement, balance sheet, and statement of cash flows. (Assume that closing entries have been Complete this ques on by entering your answers in the tabs below. Income Statement Balance Sheet Statement of Cash Flows Prepare an income statement. TERRY'S AUTO SHOP Income Statement For the Year Ended December 31, Year 2 Net sales 13,600 Cost of goods sold (2,590) Gross margin 11,010 Operating expenses 8,640 Transportation-out (150) Net income $ 2,520 Balance Sheet > Complete this question by entering your answers in the tabs below. Income Statement Balance Sheet Statement of Cash Flows Prepare a balance sheet. TERRY'S AUTO SHOP Balance Sheet As of December 31, Year 2 Assets Cash Inventory Total assets Liabilities Accounts payable Total liabilities Stockholders' equity Common stock Retained earnings + 16,440 4,225 $ 20,665 $ 0 Total stockholders' equity 0 Total liabilities and stockholders' equity $ 0 mplete this question by Income Statement Balance Sheet Statement of Cash Flows Prepare a statement of cash flows. (Assume that closing entries have been made.) (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: Not cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net change in cash Ending cash balance $ 0 0 $ 0