During Year 2, the ce
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![[The following information applies to the questions displayed below.]
At the beginning of Year 2, the Redd Company had the following balances in its accounts:
Cash
Inventory.
Common stock
Retained earnings
$8,100
2,100
7,600
2,600
During Year 2, the company experienced the following events:
1. Purchased inventory that cost $5,600 on account from Ross Company under terms 2/10, n/30. The merchandise was
delivered FOB shipping point. Freight costs of $510 were paid in cash.
2. Returned $300 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 $6,100 for $9,100 on account, under terms 2/10, n/45.
5. Received merchandise returned from a customer. The merchandise originally cost $510 and was sold to the customer
for $810 cash. The customer was paid $810 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $610 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Took a physical count indicating that $1,800 of inventory was on hand at the end of the accounting period.
b. Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA
for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the
cell blank. The first event is recorded as an example. (Not every cell will require entry. Enter any decreases to account balances
and cash outflows with a minus sign.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9f059010-aab4-485c-be78-4109f41204f8%2F06777797-4d27-409c-a2e7-b1fec1e41cc4%2Fij0bj39_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[The following information applies to the questions displayed below.]
At the beginning of Year 2, the Redd Company had the following balances in its accounts:
Cash
Inventory.
Common stock
Retained earnings
$8,100
2,100
7,600
2,600
During Year 2, the company experienced the following events:
1. Purchased inventory that cost $5,600 on account from Ross Company under terms 2/10, n/30. The merchandise was
delivered FOB shipping point. Freight costs of $510 were paid in cash.
2. Returned $300 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 $6,100 for $9,100 on account, under terms 2/10, n/45.
5. Received merchandise returned from a customer. The merchandise originally cost $510 and was sold to the customer
for $810 cash. The customer was paid $810 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $610 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Took a physical count indicating that $1,800 of inventory was on hand at the end of the accounting period.
b. Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA
for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the
cell blank. The first event is recorded as an example. (Not every cell will require entry. Enter any decreases to account balances
and cash outflows with a minus sign.)
Transcribed Image Text:b. Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA
for investment activity, FA for financing activity, or NC for net change in cash. If the element is not affected by the event, leave the
cell blank. The first event is recorded as an example. (Not every cell will require entry. Enter any decreases to account balances
and cash outflows with a minus sign.)
Event
Bal.
1a.
1b.
2.
3.
4a.
4b.
5a.
5b.
6.
7.
8.
Bal.
Cash
Assets
Accounts
+
Receivable
8,100+
+
(510)+
+
+
+
+
(810) +
+
+
+
+
$ 6,780 +
+
+
+
+
+
9,100+
+
+
+
+
+
Balance Sheet
Merchandise
Inventory
= Liabilities + Stockholders' Equity
Accounts Common
Payable Stock
Retained
Earnings
2,600
=
2,100 =
5,600 =
510=
300 =
6,100 =
=
REDD COMPANY
Horizontal Statements Model - Year 2
$ 9,100+ $ 14,610 = $
+
+
+
+
+
+
0+
+
7,600 +
+
+
+
+
+
+
+
+
$7,600 +
Revenue
$ 2,600 $
Income Statement
Expenses =
0-$
=
=
0= $
Net
Income
0
$
Statement of Cash
Flows
0
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