Powell Company began the Year 3 accounting period with $44,000 cash, $90,000 inventory. $64,000 common stock, and $70,000 retained earnings. During Year 3, Powell experienced the following events: 1. Sold merchandise costing $60,000 for $103,500 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,100 cash. 3. Received returned goods from Prentise. The goods cost Powell $4,400 and were sold to Prentise for $6,600. 4. Granted Prentise a $3,400 allowance for damaged goods that Prentise agreed to keep. 5. Collected partial payment of $84,500 cash from accounts receivable. Required: a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). b. Prepare an income statement, a balance sheet, and a statement of cash flows. c. Why would Prentise agree to keep the damaged goods? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req B3 Req C Why would Prentise agree to keep the damaged goods? Note: Select "Yes" if the item is a reason to agree, and "No" if it is not. Get goods at reduced cost. Can resell the damaged goods. Repair the damaged goods. Retain the damaged goods. < Req B3 Req C >
Powell Company began the Year 3 accounting period with $44,000 cash, $90,000 inventory. $64,000 common stock, and $70,000 retained earnings. During Year 3, Powell experienced the following events: 1. Sold merchandise costing $60,000 for $103,500 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,100 cash. 3. Received returned goods from Prentise. The goods cost Powell $4,400 and were sold to Prentise for $6,600. 4. Granted Prentise a $3,400 allowance for damaged goods that Prentise agreed to keep. 5. Collected partial payment of $84,500 cash from accounts receivable. Required: a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA). b. Prepare an income statement, a balance sheet, and a statement of cash flows. c. Why would Prentise agree to keep the damaged goods? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req B3 Req C Why would Prentise agree to keep the damaged goods? Note: Select "Yes" if the item is a reason to agree, and "No" if it is not. Get goods at reduced cost. Can resell the damaged goods. Repair the damaged goods. Retain the damaged goods. < Req B3 Req C >
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter5: Accounting For Retail Businesses
Section: Chapter Questions
Problem 41E: Cost of goods sold and related items The following data were extracted from the accounting records...
Related questions
Question
Transcribed Image Text:Powell Company began the Year 3 accounting period with $44,000 cash, $90,000 inventory. $64,000 common stock, and $70,000
retained earnings. During Year 3, Powell experienced the following events:
1. Sold merchandise costing $60,000 for $103,500 on account to Prentise Furniture Store.
2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,100 cash.
3. Received returned goods from Prentise. The goods cost Powell $4,400 and were sold to Prentise for $6,600.
4. Granted Prentise a $3,400 allowance for damaged goods that Prentise agreed to keep.
5. Collected partial payment of $84,500 cash from accounts receivable.
Required:
a. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of
cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify
the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA).
b. Prepare an income statement, a balance sheet, and a statement of cash flows.
c. Why would Prentise agree to keep the damaged goods?
Complete this question by entering your answers in the tabs below.
Req A
Req B1
Req B2
Req B3
Req C
Why would Prentise agree to keep the damaged goods?
Note: Select "Yes" if the item is a reason to agree, and "No" if it is not.
Get goods at reduced cost.
Can resell the damaged goods.
Repair the damaged goods.
Retain the damaged goods.
< Req B3
Req C >
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
