! Required information [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 Land Common stock Retained earnings $14,800 5,000 2,200 11,000 11,000 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $11,400 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $820 were paid in cash. 2. Returned $550 of the inventory it had purchased from Ross Company 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 $7,500 for $13,500 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $1,300 and was sold to the customer for $2,300 cash. The customer was paid $2,300 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $710 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Sold the land for $3,900. 9. Recognized accrued interest income of $350. (To record this entry, debit the asset account Interest Receivable (this account will be on the balance sheet in the asset section and does NOT get closed at year end) and credit the revenue account Interest Revenue (this account is a temporary revenue account recorded on the income statement that gets closed at year end). This entry will be discussed in future chapters and will NOT be tested on Test 2). 10. Took a physical count indicating that $6,700 of inventory was on hand at the end of the accounting period. (Hint: Determine the current balance in the inventory account before calculating the amount of the inventory write down.) b. Record the events in general journal format. Assume that the perpetual inventory method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 3 6 7 8 15 > Record entry inventory purchased on account from Ross company terms 2/10, n/30. Note: Enter debits before credits. Event General Journal Debit Credit 1a Record entry Clear entry View general Journal c. Post the beginning balances and the events to the T-accounts. Note that these ledger accounts will also be used when posting the closing entry that is created in Parte. Cash Merchandise Inventor Beg. Bal Beg. Bal End. Bal End. Bal Bal Accounts Receivable Interest Receivable Beg. Bal Beg. Bal End. Bal End. Bal Land Accounts Payable Beg. Bal Beg. Bal End. Bal End. Bal Common Stock Retained Earnings Beg Bal Beg. Bal End. Bal End. Bal . Sales Revenue Cost of Goods Sold Beg Bal Beg. Bal Bal Bal Transportation-out Interest Revenue Beg. Bal Beg. Bal Bal Bal Gain on Sale of Land Beg. Bal Bal d. Prepare a multistep income statement, a statement of changes in stockholders' equity, and a balance sheet for year 2. REDD COMPANY Income Statement For the Year Ended December 31, Year 2 0 Operating expenses Nonoperating Items $ 0 REDD COMPANY Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 $ 0 0 Total stockholders' equity s 0 REDD COMPANY Balance Sheet As of December 31, Year 2 Assets 0 Total assets Liabilities Stockholders' Equity 0 Total stockholders' equity Total liabilities and stockholders' equity 0 e. Use a single general journal to close all revenue, gain, and expense accounts to the retained earnings account. Post the journal entry to the ledger accounts created in Part c and prepare a post-closing trial balance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record entry to close all revenue, gain, and expense accounts to the retained earnings account Note: Enter debits before credits General Journal Debit Credit Date Dec 31 Record entry Clear entry View general journal REDD COMPANY Post Closing Trial Balance December 31, Year 2 Account Titles Debit Credit Total S 0 $ 0
