At the beginning of 2018, the Redd Company had the following balances in its accounts:
| Cash | $ | 8,600 | |
| Inventory | 2,600 | ||
| Common stock | 8,100 | ||
| Retained earnings | 3,100 | ||
During 2018, the company experienced the following events:
Purchased inventory that cost $6,100 on account from Redd Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $560 were paid in cash.
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.
Paid the amount due on its account payable to Redd Company within the cash discount period.
Sold inventory that had cost $6,600 for $9,600 on account, under terms 2/10, n/45.
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.
Delivered goods FOB destination in Event 4. Freight costs of $660 were paid in cash.
Collected the amount due on the account receivable within the discount period.
Took a physical count indicating that $2,300 of inventory was on hand at the end of the accounting period.
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, NC for net change in cash and NA to indicate the element is not affected by the event. The first event is recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.)
| REDD COMPANY | ||||||||||||||||||
| Horizontal Statements Model - 2018 | ||||||||||||||||||
| Event | Balance Sheet | Income Statement | Statement of Cash flows | |||||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenue | - | Expenses | = | Net Income | |||||||||
| Cash | + | Accounts receivable | + | Merchandise Inventory | = | Accounts Payable | + | Common Stock | + | Retained earnings | ||||||||
| Bal. | $8,600 | + | + | $2,600 | = | + | $8,100 | + | $3,100 | - | = | NA | ||||||
| 1a. | + | + | $6,100 | = | $6,100 | + | + | - | = | NA | ||||||||
| 1b. | -$560 | + | + | = | + | + | - | $560 | = | -$560 | -$560 | OA | ||||||
| 2 | + | + | -$350 | = | -$350 | + | + | - | = | NA | ||||||||
| 3 | -$5,635 | + | + | = | -$5,750 | + | + | $115 | - | = | $115 | -$5,978 | OA | |||||
| (5750*98%) | (5735*2%) | |||||||||||||||||
| 4a. | + | $9,600 | + | = | + | + | $9,600 | - | = | $9,600 | NA | |||||||
| 4b. | + | + | -$6,600 | = | + | + | - | $6,600 | = | -$6,600 | NA | |||||||
| 5a. | -$860 | + | + | = | + | + | -$860 | - | = | -$860 | -$820 | OA | ||||||
| 5b. | + | + | $560 | = | + | + | - | -$560 | = | $560 | NA | |||||||
| 6 | -$660 | + | + | = | + | + | - | $660 | = | -$660 | -$660 | OA | ||||||
| 7 | $9,408 | + | -$9,600 | + | = | + | + | - | $192 | = | -$192 | $9,408 | OA | |||||
| (9600*98%) | (9600*2%) | |||||||||||||||||
| 8 | + | + | -$10 | = | + | + | - | $10 | = | -$10 | OA | |||||||
| Bal. | $10,293 | + | $0 | + | $2,300 | = | $0 | + | $8,100 | + | $3,100 | $8,855 | - | $7,462 | = | $1,393 | $1,390 | |
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