At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash Inventory Common stock Retained earnings $16,900 25,000 30,000 11,900 During Year 2, the company experienced the following events: 1. Purchased inventory that cost $15,200 on account from Ross Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $200 were paid in cash. 2. Returned $800 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 $18,000 for $32,000 on account, under terms 2/10, n/45. 5. Received merchandise returned from a customer. The merchandise originally cost $800 and was sold to the customer for $1,500 cash. The customer was paid $1,500 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. Took a physical count indicating that $21,100 of inventory was on hand at the end of the accounting period. Required 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, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. The first event is recorded as an example. (Not every cell will require entry. Enter any decreases to account balances and cash outflows with a minus sign.) Required 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, or NC for net change in cash. If the element is not affected by the event, leave the cell blank. The first event is recorded as an example. (Not every cell will require entry. Enter any decreases to account balances and cash outflows with a minus sign.) Event Statement of Cash Flows + Assets Cash Accounts + Receivable 16,900 + REDD COMPANY Horizontal Statements Model - Year 2 Balance Sheet Income Statement = Liabilities + Stockholders' Equity Net Merchandise Accounts Common + Expenses = Retained Revenue Income Inventory Payable Stock Earnings 25,000 = 30,000 + 11,900 15,200/= 15,200 + 200/= = (800) (800) + = + + - + + - Bal. 1a. 1b. 2. (200) + T + + (200) IOA + 1 + 3. + + + + + + 4a. 4b. + + + + 5a. 5b. + + + + + - 6. 7. 8. + + + + . + + Bal. $ 16,700 + $ 0 + $ 39,600 = $ 14,400 + $ 30,000 + $ 11,900 $ 0 - $ 0 = $ 0 $ (200)