Required information Exercise 4-12A Effect of purchase returns and allowances and freight costs on the financial statements: Perpetual system LO 4-2, 4-4, 4-6 [The following information applies to the questions displayed below.] The beginning account balances for Terry's Auto Shop as of January 1, Year 2, follows: Account Titles Cash Inventory Common Stock Retained Earnings Beginning Balances $6,080 3,020 7,380 1,720 The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $4,110. 2. The goods in Event 1 were purchased FOB shipping point with freight cost of $245 cash. 3. Returned $455 of damaged merchandise for credit on account. 4. Agreed to keep other damaged merchandise for which the company received an $250 allowance. 5. Sold merchandise that cost $2,680 for $4,890 cash. 6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $175 cash. 7. Paid $2,970 on the merchandise purchased in Event 1. Exercise 4-12A Part a 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 input needed 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.) Answer is not complete. Assets Cash Events + TERRY'S AUTO SHOP Effect of Events on the Financial Statements Liabilities Stockholders' Equity Accounts Common Retained = Payable Stock Earnings 7,380 + 1,720 = Accounts Titles for Retained Earnings Beg. Bal. 6,080 Inventory 1 3,020 4,110 + (245) + + (455) (250) (2,680) (455) (250) + = + 4,890 (175) (2,970) (2,680) 4,890 (175) Cost of sales Sales Transportation out expenses + (2.970) (3,675) + + End Bal. 7,580 3,745 7,380 + 3,755