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Required information Problem 4-25A Comprehensive cycle problem: Perpetual system LO 4-2, 4-3, 4-4, 4-5, 4-6, 4-7 (The following information applies to the questions displayed below.)

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Required information Problem 4-25A Comprehensive cycle problem: Perpetual system LO 4-2, 4-3, 4-4, 4-5, 4-6, 4-7 (The following information applies to the questions displayed below.) At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $16,900 25,000 30,000 11,900 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $15,200 on account from Ross Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $200 were paid in cash 2. Returned $800 of the inventory it had purchased because the inventory was damaged in transit. The seller agreed to pay the return freight cost. 3. Paid the amount due on its account payable to Ross Company within the cash discount period. 4. Sold inventory that had cost $18,000 for $32,000 on account, under terms 2/10. n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $800 and was sold to the customer for $1.500 cash. The customer was paid $1.500 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $140 were paid in cash. 7. Collected the amount due on the account receivable within the discount period, 8. Took a physical count indicating that $21,100 of inventory was on hand at the end of the accounting period. Required a. Identify these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE) (Select "NA" if there is no effect on the "Classification".) Event Classification 1a. 1b. (Purchase inventory). (Shipping cost). 4a. (Recording revenue). 4b. (Recording cost of goods sold). 5a.(Reversing revenue). 5b. (Reversing cost of goods sold). 6. Required information Problem 4-25A Comprehensive cycle problem: Perpetual system LO 4-2, 4-3, 4-4, 4-5, 4-6, 4-7 [The following information applies to the questions displayed below.] At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $16,900 25,000 30,000 11,900 During Year 2, the company experienced the following events: 1. Purchased Inventory that cost $15,200 on account from Ross Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $200 were paid in cash. 2. Returned $800 of the inventory it had purchased because the inventory was damaged in transit. The seller agreed to pay the return freight cost. 3. Paid the amount due on its account payable to Ross Company within the cash discount period, 4. Sold inventory that had cost $18,000 for $32,000 on account, under terms 2/10, 1/45. 5. Received merchandise returned from a customer. The merchandise originally cost $800 and was sold to the customer for $1,500 cash. The customer was paid $1,500 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $140 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $21,100 of inventory was on hand at the end of the accounting period. Problem 4-25A Part b b. Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. The first event is recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign. Not all cells in the "Statement of Cash Flows" column may require an input - leave cells blank if there is no corresponding input needed.) Income Statement REDD COMPANY Horizontal Statements Model - Year 2 Balance Sheet = Liabilities + Stockholders' Equity Merchandise Accounts Common Retained Inventory Payable Stock Earnings 25,000 = + 30,000+ 11,900 Event Statement of Cash Flows Assets Accounts Recolvable Revenue - Expenses Net Income Cash 16.900 + Bal. -P LAL

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