Question

d. Prepare a multistep income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flows for year 2. (Statement of Cash Flows only, items to be deducted must be indicated with a minus sign.) Answer is not complete. REDD COMPANY Income Statement For the Year Ended December 31, Year 2 Net sales $ 10,178 Cost of goods sold 6,542 Gross margin 3,636 Operating expenses Transportation-out (140) 3.496 Operating income Nonoperating items Sales returns and allowances Sales discounts Cost of goods sold 400 6.800 x 10.696

Answer 1

10,178 6,542 3,636 Redd Co Income Statement For the Year Ended Dec 31, Year 2 Net Sales Cost of goods sold Gross Margin Operating Expenses Transportation out Operating Income Nonoperating items Interest Income Gain on sale of assets Total Nonoperating items Net Income 140 3,496 600 1,500 2,100 5,596 15,000 Statement of Changes in Stockholders Equity For the Year Ended Dec 31, Year 2 Beginning Common Stock Add: Common Stock issued Ending Common Stock Beginning Retained Earnings Add: Net Income Ending Retained Earnings Total Stockholders Equity 15,000 13,900 5,596 19,496 34,496

Redd Co Balance Sheet As of Dec 31, Year 2 Assets Cash Interest Receivable Inventory Total Assets 20,496 600 13,400 34,496 Liabilities & Stockholders Equity Liabilities Stockholders Equity Common Stock Retained earnings Total Stockholders Equity Total Liabilities & Stockholders Equity 15,000 19,496 34,496 34,496

Indirect method Calculation Cashflow Statement For the Year Ended Dec 31, Year 2 Cash flow from Operating Activities Net income Gain on sale of assets Decrease in Inventory Increase in Interest Receivable Net Cash flow from Operating Activities 5,596 (1,500) 1,600 =13,400-15,000 (600) =0-600 5,096 Cash flow from Investing Activities Proceeds from sale of land 8,500 Cash flow from Financing Activities Proceeds from issue of stock Net change in cash Beginning cash balance Ending cash balance 13,596 6,900 20,496

Credit Calculation Redd Co Journal entries Date Account Inventory Accounts Payable Cash Debit $ 5,390 1 $ $ 5,200 190 2 $ 400 Accounts Payable Inventory $ 400 3 $ 4,800 Accounts Payable Cash Inventory $ $ =5,200-400 4,752 48 -4,800*1% $ 12,100 $ 12,100 Accounts Receivable Sales Cost of goods sold Inventory $ 6,800 $ 6,800 $ 1,680 $ 1,680 Sales returns & allowances Cash Inventory Cost of goods sold $ 900 $ 900 $ 140 Transportation out Cash $ 140 7 Cash Sales discount Accounts Receivable $ 11,858 $ 242 =12,100*2% $ 12,100 $ 8,500 Cash Land Gain on sale of assets $ $ 7,000 1,500 =8,500-7,000 $ 600 Interest Receivable Interest Income $ 600 10 $ 642 Cost of goods sold Inventory $ =14,042-13,400 642 $14,042 from T Accounts

Credit Date Date Credit Date Credit Redd Co T Accounts Date Debit Date Cash Op bal $ 6,900 1 $ 11,858 3 8 $ 8,500 5 6 Debit Date Credit Accounts Receivable $ - $ 12,100 7 $ 12,100 Debit Date Land $ 7,000 8 Op bal 4 $ 7,000 Debit Date Inventory $ 15,000 2 $ 5,390 13 $ 900 4 $ 190 $ 4,752 $ 1,680 $ 140 7 Op bal 1 5 $ 400 Op bal $ 48 $ 6,800 Bal. $ 20,496 Bal. Bal. $ 14,042 Bal. 10 $ 642 Bal. Interest Receivable $ 600 9 $ 13,400 Common Stock Op bal Accounts Payable $ 400 Op bal $ 4,800 1 2 Retained Earnings Op bal $15,000 $ 13,900 $ . $ 5,200 3 Bal. $ - $ 15,000 $ 13,900 600 Sales Bal. $ Sales returns & allowances $ 1,680 Bal. Sales discount $ 242 Bal. Cost of goods sold $ 6,800 5 $ 642 4 $ 12,100 5 7 4 $ 900 10 $ 12,100 Bal. Bal. Bal. $ 6,542 Bal. Transportation out $ 140 $ 1,680 Interest Income 9 $ 242 Gain on sale of assets 8 $ 1,500 6 $ 600 Bal. $ 140 Bal. $ 600 Bal. $ 1,500

Adjusted TB Debit Credit 20,496 600 13,400 Redd Co Account Names Cash Accounts Receivable Interest Receivable Inventory Land Accounts Payable Common Stock Retained Earnings Sales Sales returns & allowances Sales discount Cost of goods sold Transportation out Interest Income Gain on sale of assets Totals 15,000 13,900 12,100 1,680 242 6,542 140 600 1,500 43,100 43,100