The beginning account balances for Terry's Auto Shop as of January 1, Year 2, follow: Account Titles Cash Inventory Common Stock Retained Earnings Beginning Balances $6,200 3,110 7,300 2,010 The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $4,260. 2. The goods in Event 1 were purchased FOB shipping point with transportation cost of $245 cash. 3. Returned $430 of damaged merchandise. 4. Agreed to keep other damaged merchandise for which the company received a $275 allowance. 5. Sold merchandise that cost $2,640 for $4,880 cash. 6. Delivered merchandise to customers in Event 5 under terms FOB destination with transportation costs amounting to $120 cash 7. Paid $2,910 on the merchandise purchased in Event 1 b. Prepare an income statement and a statement of cash flows for Year 2. (Assume that closing entries have been made.)