Question

At the beginning of Year 2, the Redd Company had the following balances in its accounts: Cash $ 17,300 Inventory 7,500 Land 2,700 Common stock 16,000 Retained earnings 11,500 During Year 2, the company experienced the following events: Purchased inventory that cost $11,900 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $870 were paid in cash. Returned $800 of the inventory it had purchased from Ross Company 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 $8,000 for $16,000 on account, under terms 2/10, n/45. Received merchandise returned from a customer. The merchandise originally cost $1,550 and was sold to the customer for $2,800 cash. The customer was paid $2,800 cash for the returned merchandise. Delivered goods FOB destination in Event 4. Freight costs of $760 were paid in cash. Collected the amount due on the account receivable within the discount period. Recognized accrued interest income of $600. Took a physical count indicating that $7,200 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.) a. Record the events in general journal format. Assume that the perpetual inventory method and gross method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1