Question

Required information {The following information applies to the questions displayed below. At the beginning of Year 2, the Redd Company had the following balances in its accounts:
Cash $8,200
Inventory 2,200
Common stock 7, 700
Retained earnings 2,700
During Year 2, the company experienced the following events:
1. Purchased inventory that cost $5,700 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $520 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 Ross Company within the cash discount period.
4. Sold inventory that had cost $6,200 for $9,200 on account, under terms 2/10, n/45.
5. Received merchandise returned from a customer. The merchandise originally cost $520 and was sold to the customer for $820 cash. The customer was paid $820 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $620 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Took a physical count indicating that $1,900 of inventory was on hand at the end of the accounting period.
Required
a. Identify these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE) (Select "NA" if there is no effect on the "Classification".) Classification Event 1a. (Purchase inventory). 16. (Shipping cost) 4a. (Recording revenue). 4b. (Recording cost of goods sold) 5a.(Reversing revenue) 46. (Reversing cost of goods sold). 6.
b. Record each event in a statements model like the following one. In the Cash Flow column, use OA to designate operating activity, IA for investment activity, FA for financing activity, and NC for net change in cash. The first event is recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.

Answer 1

Answer:

Assets:

Cash 8200 - 520 - 5243 - 820 - 620 + 9016 = 10,013

Receivables 9200 - 9200 = 0

Inventory 2200 + 5700 + 520 - 350 - 107 - 6200 + 520 - 383 = 1900

Liabilities:

Accounts Payable 5700 - 350 - 5350 = 0

Common Stock 7700 = 7700

Explanation:

Redd Company has incurred multiple transactions which will require adjustments before financial statements are prepared. These transaction will have effects on both sides of the accounts assets and liabilities. Common stock is not affected by the transactions as this is equity section.