The beginning account balances for Terry$$s Auto Shop as of January $1,$ Year $2,$ follow:

Account Titles Beginning Balances

Cash $ $6,020$

Inventory $3,130$

Common Stock $7,410$

Retained Earnings $1,740$

The following events affected the company during the Year $2$ accounting period:

Purchased merchandise on account that cost $$4,190.$

The goods in Event $1$ were purchased FOB shipping point with transportation cost of $$265$ cash.

Returned $$410$ of damaged merchandise.

Agreed to keep other damaged merchandise for which the company received a $$275$ allowance.

Sold merchandise that cost $$2,710$ for $$4,820$ cash.

Delivered merchandise to customers in Event $5$ under terms FOB destination with transportation costs amounting to $$125$ cash.

Paid $$2,860$ on the merchandise purchased in Event $1.$

Exercise $4-12$A $($Algo$)$ Part b

b$.$ Prepare an income statement and a statement of cash flows for Year $2.($Assume that closing entries have been made.$)$