Question

Required information (The following information applies to the questions displayed below.) Part 2 of 4 At the beginning of Year 2, the Redd Company had the following balances in its accounts: 0.4 points Cash Inventory Land Common stock Retained earnings $ 6,900 15,000 7,000 15,000 13,900 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $5,200 on account from Ross Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $190 were paid in cash. 2. Returned $400 of the inventory it had purchased from Ross Company 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 $6,800 for $12,100 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $900 and was sold to the customer for $1,680 cash. The customer was paid $1,680 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $140 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Sold the land for $8,500. 9. Recognized accrued interest income of $600. 10. Took a physical count indicating that $13,400 of inventory was on hand at the end of the accounting period. (Hint: Determine the current balance in the inventory account before calculating the amount of the inventory write down.) c. Post the beginning balances and the events to the T-accounts. Note that these ledger accounts will also be used when posting the ܀ ܚ ܐ ܫ ܝ ܚ ܗ . ܙ ܝ ܝ ܚ ܐ ܠܩ ܐܐ ܝܘܐ ܝܐ ܘܐ ܩ ܚ ܀

Answer 1

Posting the beginning balances and the events to the T-Accounts.

Cash a/c

Beg. Bal	$6,900
7.b	$11,858	$190	1.b
8	$8,500	$4,752	3.b
		$1,680	5.a
		$140	6
Ending bal	$20,496		Ending bal

Merchandise inventory a/c

Beg. Bal	$15,000
1.a	$5,200	$400	2
1.b	$190	$48	3a
5.b	$900	$6,800	4.b
Bal	$14,042
		$642	10
Ending bal	$13,400		Ending bal

Accounts receivable

Beg. Bal
4a	$12,100	$242	7a
		$11,858	7b
Ending bal			Ending bal

Interest receivable

Beg. Bal
9	$600
Ending bal	$600		Ending bal

Land a/c

Beg. Bal	$7,000
		$7,000	8
Ending bal			Ending bal

Accounts payable

Beg. Bal
2	$400	$5,200	1a
3a	$48
3b	$4,752
Ending bal			Ending bal

Common stock a/c

Beg. Bal		$15,000
Ending bal		$15,000	Ending bal

Retained earnings a/c

Beg. Bal		$13,900
		$2,100	cl.
Cl.	$6,682	$10,170	cl.
Ending bal		$19,488	Ending bal

Sales Revenue a/c

Beg. Bal
5a	$1,680	$12,100	4a
7a	$242
Ending bal		$10,170	Ending bal
Cl.	$10,170

Cost of goods sold a/c

Beg. Bal
4b	$6,800	$900	5b
10	$642
Ending bal	$6,452		Ending bal
		$6,452	Cl.

Transportation out

Beg. Bal
6	$140
Ending bal	$140		Ending bal
		$140	Cl.

Interest revenue a/c

Beg. Bal
		$600	9
Cl.	$600
Ending bal			Ending bal

Gain on sale of land

Beg. Bal
		$1,500	8
Cl.	$1,500
Ending bal			Ending bal

Notes:

3a = Accounts payable (5,209-400×0.01)=$48

3b = Accounts payable (5,200-409-48)=$4,752

7a = Accounts receivable (12,100×0.02)=$242

7b =Accounts receivable (12,100-242)=$11,858

____×____

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