Powell Company began the Year 3 accounting period with $45,000 cash, $91,000 inventory, $65,000 common stock, and $71,00o retained earnings. During Year 3, Powell experienced the following events: 1. Sold merchandise costing $60,500 for $104,500 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,200 cash. 3. Received returned goods from Prentise. The goods cost Powell $4,500 and were sold to Prentise for $6,80o. 4. Granted Prentise a $3,500 allowance for damaged goods that Prentise agreed to keep. 5. Collected partial payment of $85,500 cash from accounts receivable. Required a. Record the events in a statements model shown below. b. Prepare an income statement, a balance sheet, and a statement of cash flows. c. Why would Prentise agree to keep the damaged goods?
Powell Company began the Year 3 accounting period with $45,000 cash, $91,000 inventory, $65,000 common stock, and $71,00o retained earnings. During Year 3, Powell experienced the following events: 1. Sold merchandise costing $60,500 for $104,500 on account to Prentise Furniture Store. 2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,200 cash. 3. Received returned goods from Prentise. The goods cost Powell $4,500 and were sold to Prentise for $6,80o. 4. Granted Prentise a $3,500 allowance for damaged goods that Prentise agreed to keep. 5. Collected partial payment of $85,500 cash from accounts receivable. Required a. Record the events in a statements model shown below. b. Prepare an income statement, a balance sheet, and a statement of cash flows. c. Why would Prentise agree to keep the damaged goods?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Powell Company began the Year 3 accounting period with $45,000 cash, $91,000 inventory, $65,000 common stock, and $71,000
retained earnings. During Year 3, Powell experienced the following events:
1. Sold merchandise costing $60,500 for $104,500 on account to Prentise Furniture Store.
2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,200 cash.
3. Received returned goods from Prentise. The goods cost Powell $4,500 and were sold to Prentise for $6,800.
4. Granted Prentise a $3,500 allowance for damaged goods that Prentise agreed to keep.
5. Collected partial payment of $85,500 cash from accounts receivable.
Required
a. Record the events in a statements model shown below.
b. Prepare an income statement, a balance sheet, and a statement of cash flows.
c. Why would Prentise agree to keep the damaged goods?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6c69ef06-8c23-4aa5-b67b-ed39b7581d5a%2F5c5fd788-b5b6-401f-9eb0-26a3cfa45da6%2Fkku5o3_processed.png&w=3840&q=75)
Transcribed Image Text:Powell Company began the Year 3 accounting period with $45,000 cash, $91,000 inventory, $65,000 common stock, and $71,000
retained earnings. During Year 3, Powell experienced the following events:
1. Sold merchandise costing $60,500 for $104,500 on account to Prentise Furniture Store.
2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,200 cash.
3. Received returned goods from Prentise. The goods cost Powell $4,500 and were sold to Prentise for $6,800.
4. Granted Prentise a $3,500 allowance for damaged goods that Prentise agreed to keep.
5. Collected partial payment of $85,500 cash from accounts receivable.
Required
a. Record the events in a statements model shown below.
b. Prepare an income statement, a balance sheet, and a statement of cash flows.
c. Why would Prentise agree to keep the damaged goods?
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