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 $7,800 1,8001 7,300 Retained earnings 2,300 Common stock During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,300 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $480 were paid in cash. 2. Returned $350 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 $5,800 for $8,800 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $480 and was sold to the customer for $780 cash. The customer was paid $780 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $580 were paid in cash. 7. Collected the amount due on the account receivable within the discourt period. 8. Took a physical count indicating that $1,500 of inventory was on hand at the end of the accounting period. of 3 REDD COMPANY Horizontal Statements Model - Year 2 Balance Sheet Income Statement Event Assets. Liabilities Stockholders' Equity Statement of Cash Book Accounts Merchandise Cash Receivable Inventory Accounts Payable Common Retained Revenue Expenses Net Income Flows Stock rim Bal. 7,800+ 1,800 7,300 Earnings 2,300 1a. + 5,300 5,300+ 1b. (480) 480 2. . (350) (350) 3. " 1 4a. . " 4b Sa 5b. 6. 7. + 8. Bal $ 7,320+ $ 0+ $ 7,230 $4,950 + $ 7,300+ $ 2,300 $ 0 $ $ 0 $ Prepare a multistep income statement. REDD COMPANY Income Statement For the Year Ended December 31, Year 2 Net sales Cost of goods sold Gross margin Operating expenses Transportation-out Net income REDD COMPANY Statement of Changes in Stockholders' Equity For the Year Ended December 31, Year 2 Beginning common stock Ending common stock Beginning retained earnings $ 0 Ending retained earnings Total stockholders' equity $ 199 0 0 Assets Total assets Liabilities Stockholders' Equity REDD COMPANY Balance Sheet As of December 31, Year 2 $ 0 Total stockholders' equity $ 0 Total liabilities and stockholders' equity $ 0 REDD COMPANY Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flows from operating activities Net cash flow from operating activities Cash flows from investing activities: Cash flows from financing activities: Net change in cash Ending cash balance $ 0 0 $ 0 101 applies to the questions displayed below.j At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $7,800 1,800 7,300 2,300 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,300 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $480 were paid in cash. 2. Returned $350 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 $5,800 for $8,800 on account, under terms 2/10, n/45. 5. Received merchandise returned from a custolner. The merchandise originally cost $480 and was sold to the customer for $780 cash. The customer was paid $780 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $580 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $1,500 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.)