[The following information applies to the questions displayed below.]

At the beginning of 2016, the Redd Company had the following balances in its accounts:

Cash	$23,800
Inventory	5,000
Land	3,100
Common stock	20,000
Retained earnings	11,900

During 2016, the company experienced the following events:

1.	Purchased inventory that cost $12,300 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $910 were paid in cash.
2.	Returned $500 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 $9,500 for $17,500 on account, under terms 2/10, n/45.
5.	Received merchandise returned from a customer. The merchandise originally cost $1,750 and was sold to the customer for $2,200 cash. The customer was paid $2,200 cash for the returned merchandise.
6.	Delivered goods FOB destination in Event 4. Freight costs of $800 were paid in cash.
7.	Collected the amount due on the account receivable within the discount period.
8.	Sold the land for $5,700.
9.	Recognized accrued interest income of $800.
10.	Took a physical count indicating that $4,200 of inventory was on hand at the end of the accounting period.

Required:

a.

Identify each of these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event would affect the financial statements by placing a + for increase, for decrease, +/ for increase and decrease, or NA for not affected under each of the components in the following statements model. Assume that the perpetual inventory method is used. When an event has more than one part, use letters to distinguish the effects of each part. The first event is recorded as an example. (In the Cash Flow column, use the initials OA to designate operating activity, IA for investing activity, FA for financing activity, and NA for not affected.)

REDD COMPANY

Effect of Events on the Financial Statements for 2016

Event No.

Event Type

Balance Sheet

Income Statement

Statement of Cash Flows

Assets

=

Liabilities

+

Stk. Equity

Revenue

Expenses

=

Net Income

1a.

AS

+

+

NA

NA

NA

NA

NA

NA

1b.

AE

+/-

NA

NA

NA

NA

NA

-

OA

2.

3a. Disc.

3b. Pay.

4a. Sale

4b. Cost

5a. Ret Rev

5b. Ret Cost

6. Frt.

7a. Disc.

7b. Coll.

8. Land

9. Int.

10. Adj.

b.	Record the events in general journal format. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Event 1a:

Record entry inventory purchased on account from Ross company terms 2/10, n/30.

Event 1b: Record entry freight cost paid in cash

Event 2: Record entry for return of inventory was damaged in transit

Event 3a: Record entry for discount on inventory purchased

Event 3b: Record entry paid for accounts payable.

Event 4a: Record entry for sale of inventory on account

Event 4b: Record entry for the cost of goods sold

Event 5a: Record entry for return of merchandise sold.

Event 5b: Record entry for cost of goods sold return.

Event 6: Record cash paid for freight charges for delivered goods

Event 7a: Record entry for discount on inventory sold

Event 7b: Record entry for collect the amount due on account recievable within the discount period

Event 8: Record the sale of land.

Event 9: Record entry to recognized accrued interest income.

Event 10: Record entry for inventory loss.

c.

Post the beginning balances and the events to the T-accounts.

Cash					Merchandise Inventory
Beg. Bal					Beg. Bal
End. Bal			End. Bal		Bal
Accounts Receivable					Interest Receivable
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Land					Accounts Payable
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Common Stock					Retained Earnings
Beg. Bal					Beg. Bal
End. Bal					End. Bal
Sales Revenue					Cost of Goods Sold
Beg. Bal					Beg. Bal
Bal					Bal
Transportation-out					Interest Revenue
Beg. Bal					Beg. Bal
Bal					Bal
Gain on Sale of Land
Beg. Bal
Bal

d.

Prepare a multistep income statement, a statement of changes in stockholders equity, a balance sheet, and a statement of cash flows. (Statement of Cash Flows only, items to be deducted must be indicated with a negative amount.)

REDD COMPANY
Income Statement
For the Year Ended December 31, 2016
Operating expenses
Nonoperating items

REDD COMPANY
Statement of Changes in Stockholders Equity
For the Year Ended December 31, 2016
Total stockholders equity

REDD COMPANY
Balance Sheet
As of December 31, 2016
Assets
Total assets
Liabilities
Stockholders Equity
Total stockholders' equity
Total liabilities and stockholders' equity

REDD COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash flow from operating activities
Net cash flow from operating activities
Cash flows from investing activities
Cash flows from financing activities
Ending cash balance

e.	Record the closing entries. Post the entries to the T accounts (in part C). Prepare a post-closing trial balance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

-Record entry to close revenue

- Record entry to close Cost of goods sold & Transportation-out

-Record entry to close interest revenue and gain from sale of land

and

REDD COMPANY
Post Closing Trial Balance
December 31, 2016
Account Titles	Debit	Credit
Total