80.2K

Verified Solution

Link Copied!

During Year $2,$ the company experienced the following events:

Purchased inventory that cost $$12,700$ on account from Ross Company under terms $\frac{2}{10},\frac{n}{30}.$ The merchandise was

delivered FOB shipping point. Freight costs of $$950$ were paid in cash the responsible party.

Returned $$700$ of the inventory it had purchased because the inventory was damaged in transit. The seller agreed to

pay the return freight cost.

Paid the amount due on its account payable to Ross Company within the cash discount period.

Sold inventory that had cost $$10,000$ for $$19,000$ on account, under terms $\frac{2}{10},\frac{n}{45}.$

Received merchandise returned from a customer. The merchandise originally cost $$1,950$ and was sold to the

customer for $$2,600$ cash. The customer was paid $$2,600$ cash for the returned merchandise.

Delivered goods FOB destination in Event $4.$ Freight costs of $$840$ were paid in cash by the responsible party.

Collected the amount due on the account receivable within the discount period.

Sold the land for $$6,500.$

Recognized accrued interest income of $$450,$

Took a physical count indicating that $$4,600$ 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.

Required:

a$.$ Explain how each event would affect the financial statements by placing a $+$ for increase, $-$ for decrease, and $\frac{+}{-}$ for

increase and decrease under each of the components in the following statements model. Assume that the perpetual

inventory method is used. When an event has more than one part, use letters to distinguish the effects of each part.

The first event is recorded as an example.

b$.$ Record the events in general journal format. Assume that the perpetual inventory method and gross method is used.

c$.$ Post the beginning balances and the events to the T$-$accounts. Note that these ledger accounts will also be used

when posting the closing entry that is created in Part e$.$

d$.$ Prepare a multistep income statement, a statement of changes in stockholders' equity, and a balance sheet for Year

e$.$ Use a single general journal entry $($i$.$e$.,$ compound entry$)$ to close all revenue, gain, and expense accounts to the

retained earnings account. Post the journal entry to the ledger accounts and prepare a post$-$closing trial balance.

Complete this question by entering your answers in the tabs below.

Explain how each event would affect the financial statements by placing a $+$ for increase, $-$ for decrease,

and $\frac{+}{-}$ for increase and decrease under each of the components in the following statements model.

Assume that the perpetual inventory method is used. When an event has more than one part, use letters

to distinguish the effects of each part. The first event is recorded as an example. $($In the Statement of

Cash Flows column, use the initials OA to designate operating activity, IA for investing activity, and FA for

financing activity. If there is not cash activity in the event, leave the columns blank.$)$

Show less $A$

Answer & Explanation Solved by verified expert

See Answer