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 Common stock Retained earnings $8,400 2,400 7,900 2,900 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,900 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $540 were paid in cash. 2. Returned $400 of the inventory that 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 $6,400 for $9,400 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $540 and was sold to the customer for $840 cash. The customer was paid $840 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $640 were paid in cash. 7. Collected the amount due on the account rece withi the discount period. 8. Took a physical count indicating that $2,100 of inventory was on hand at the end of the accounting period. 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, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. The first event is recorded as an example. (Not every cell will require entry. Enter any decreases to account balances and cash outflows with a minus sign.) Answer is not complete. Income Statement + Event Assets Accounts Receivable Revenue Expenses = Net Income Cash + + + REDD COMPANY Horizontal Statements Model - Year 2 Balance Sheet Liabilities Stockholders' Equity Merchandise Accounts Common Retained + Inventory Payable Stock Earnings 2,400 + 7,900 2,900 5,900 5,900+ 540 (400) (400) (110) = (5,500) + + + Bal. 8,400 + + = + - 1a. + + + = + 1b. (540) + + + + + 2 + + = + + 3. (5,390) ) + + 4a. + 9,400 > + + 9,400 4b. + + (6,400) = + + 6,400 5a. (840) + + + + (840) - 9,400 (6,400) (840) 540 (640) 5b. + + 540 = + + = (540) = 640 = 6. + + + + - (640) 9,212 + 7. (9,400) + + + 8. + + = + + Bal. $ 10,202 + $ 0 + $ 2,470 $ 0 + $ 7,900 + $ 2,900 $ 8,560 $ 6,500 $ 2,060 X Answer is not complete. REDD COMPANY Horizontal Statements Model - Year 2 Balance Sheet Income Statement + Assets Accounts Receivable Liabilities Accounts Payable Statement of Cash Flows Revenue Expenses Net Income + + Stockholders' Equity Common Retained + Stock Earnings 7,900 2,900 Merchandise Inventory 2,400 5,900 = + = + + = + 5,900 + + + 540 + + = (540) OA + + (400) = (110) = (400) + (5,500) + + + = (5,390) OA 9,400 + + + 9,400 + (6,400) = = + + 6,400= + = + + (840) 9,400 (6,400) (840) 540 (640) OOOOO (840) OA + 540 = + + (540) = 640= + + + (640) OA 9,212 OA (9,400) + = + + + + + $ 0 + $ 2,470 S 0 + $ 7,900 + $ 2,900 $ 8,560 $ 6,500 = $ 2,060 $ 1,802