The following trial balance pertains to Reeves Hardware as of January 1, 2005:

The following events occurred in 2005. Assume that Reeves Hardware uses the periodic inventory system.
1. Purchased land for \($25,000\) cash.
2. Purchased merchandise on account for \($23,000\), terms 2/10, n/30.
3. The merchandise purchased was shipped FOB shipping point for \($230\) cash.
4. Returned \($2,000\) of defective merchandise purchased in Event 2.
5. Sold merchandise for \($27,000\) cash.
6. Sold merchandise on account for \($50,000\), terms 1/20, n/30.
7. Paid cash within the discount period on accounts payable due on merchandise purchased in Event 2.
8. Paid \($1,200\) cash for selling expenses.
9. Collected part of the balance due from accounts receivable in Event 6. Collections were made after the discount period on \($12,000\) list amount of sales on account. Collections were made during the discount period on \($35,000\) list amount of sales on account.
10. Performed a physical count indicating that \($30,000\) of inventory was on hand at the end of the accounting period.

Required

a. Record the above transactions in a horizontal statements model like the following one.

b. Prepare a schedule of cost of goods sold and an income statement.

Transcribed Image Text:

Account Title Debit Credit Cash $ 74,000 Accounts Receivable 9,000 Merchandise Inventory 60,000 Accounts Payable $ 5,000 Common Stock 70,000 Retained Earnings 68,000 Total $143,000 $143,000