Question

Required Information [The following information applies to the questions displayed below.] At the beginning of 2018, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $8,689 2,600 8, les 3,100 During 2018, the company experienced the following events: 1. Purchased inventory that cost $6.100 on account from Ross Company under terms 2/10. n/30. The merchandise was delivered FOB shipping point. Freight costs of $560 were paid in cash. 2. Returned $350 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 Redd Company within the cash discount period. 4. Sold inventory that had cost $6,500 for $9.500 on account, under terms 2/10, 1/45. 5. Received merchandise returned from a customer. The merchandise originally cost $560 and was sold to the customer for $860 cash. The customer was paid $860 cash for the returned merchandise. 6. Delivered goods FOB destination in Event 4. Freight costs of $660 were paid in cash. 7. Collected the amount due on the account receivable within the discount period. 8. Took a physical count indicating that $2,300 of inventory was on hand at the end of the accounting period

Answer 1

B.

	Assets					=	Liabilities	+	Stockholder's Equity			Income Statement
Event	Cash	+	Accounts Receivable	+	Merchandise Inventory	=	Accounts payable	+	Commons Stock	+	Retained Earnings	Revenues	-	Expenses	=	Net Income	Statement of Cash Flows
Bal.	$8,600	+		+	$2,600	=		+	$8,100	+	$3,100		-		=
1a		+		+	$6,100	=	$6,100	+		+			-		=
1b	($560)	+		+	$560	=		+		+			-		=		($560)	OA
2		+		+	($350)	=	($350)	+		+			-		=
3	($5,635)	+		+	($115)	=	($5,750)	+		+			-		=		($5,635)	OA
4a		+	$9,600	+		=		+		+	$9,600	$9,600	-		=	$9,600
4b		+		+	($6,600)	=		+		+	($6,600)		-	$6,600	=	($6,600)
5a	($860)	+		+		=		+		+	($860)	($860)	-		=	($860)	($860)	OA
5b		+		+	$560	=		+		+	$560		-	($560)	=	$560
6	($660)	+		+		=		+		+	($660)		-	$660	=	($660)	($660)	OA
7	$9,408	+	($9,600)	+		=		+		+	($192)		-	$192	=	($192)	$9,408	OA
8		+		+	($455)	=		+		+	($455)		-	$455	=	($455)
Bal.	$10,293	+	$0	+	$2,300	=	$0	+	$8,100	+	$4,493	$8,740	-	$7,347	=	$1,393	$1,693