The beginning account balances for Terrys Auto Shop as of January 1, 2018, follows:

Account Titles Beginning Balances

Cash $ 6,170

Inventory 3,050

Common Stock 7,360

Retained Earnings 1,860

The following events affected the company during the 2018 accounting period:

Purchased merchandise on account that cost $4,260.

The goods in Event 1 were purchased FOB shipping point with freight cost of $245 cash.

Returned $465 of damaged merchandise for credit on account.

Agreed to keep other damaged merchandise for which the company received an $210 allowance.

Sold merchandise that cost $2,680 for $4,800 cash.

Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $135 cash.

Paid $2,920 on the merchandise purchased in Event 1.

Prepare an income statement and a statement of cash flows for 2018. (Assume that closing entries have been made.)