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See attached document for questions. On question 4 you will notice that I began Part B, but feel free to adjust, I am not confident they are correct.
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Question 4
At the beginning of Year 2, the Redd Company had the following balances in
its accounts.
Cash
$16,300
Inventory
8,500
Land
3,800
Common stock
16,000
Retained earnings 12,600
During Year 2, the company experienced the following events:
1. Purchased inventory that cost $13,000 on account from Ross Company
under terms 2/10, n/30. The merchandise was delivered FOB shipping
point. Freight costs of $980 were paid in cash.
2. Returned $850 of the inventory 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 $12,000 for $21,000 on account, under terms
2/10, n/45.
5. Received merchandise returned from a customer. The merchandise
originally cost $2,100 and was sold to the customer for $2,900 cash. The
customer was paid $2,900 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $870 were
paid in cash.
7. Collected the amount due on the account receivable within the discount
period.
8. Sold the land for $7,100.
9. Recognized accrued interest income of $600.
10.
Took a physical count indicating that $5,000 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. Identify each of these events as asset source (AS), asset use (AU), asset
exchange (AE), or claims exchange (CE). Also explain how each event
would affect the financial statements by placing a + for increase, − for
decrease, and +/− 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, a balance sheet, and a statement of cash flows for
Year 2.
e. Use a single general journal 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.
Part A
Part B
Part C
Part D1
Part D2
Part D3
Part D4
Part E1
Part E2
Question 5
The following information was taken from the accounts of Green Market, a
small grocery store, at December 31, Year 2. The accounts are listed in
alphabetical order, and all have normal balances. Dollar amounts are given in
thousands.
Accounts payable
Accounts receivable
Advertising expense
Cash
Common stock
Cost of goods sold
Interest expense
Merchandise inventory
Prepaid rent
Retained earnings, 1/1/Year 2
Sales revenue
Salaries expense
Rent expense
Gain on sale of land
$ 607
407
200
417
207
600
63
380
47
642
1,070
200
100
112
Required
Prepare an income statement for the year using the single-step and
multistep approach.
Question 6
The following information is available for the Memphis and Billings companies.
Memphis
Sales
$ 918,000
Cost of goods sold
Operating expenses
Total assets
Stockholders’ equity
640,000
230,000
1,340,000
320,000
Billings
$
1,114,240
725,000
326,620
1,450,000
310,000
Required
a. Prepare a common size income statement for each company.
b. Compute the return on assets and return on equity for each company.
c. Which company is more profitable from the stockholders’ perspective?
d. One company is a high-end retailer, and the other operates a discount
store. Which is the discounter?
Part A
Part B
Part C
Part D
Question 7
Tippah Antiques uses the periodic inventory system to account for its
inventory transactions. The following account titles and balances were drawn
from Tippah’s records for Year 2: beginning balance in inventory, $24,400;
purchases, $306,300; purchase returns and allowances, $12,500; sales,
$720,000; sales returns and allowances, $6,250; freight-in, $1,800; and
operating expenses, $51,000. A physical count indicated that $24,300 of
merchandise was on hand at the end of the accounting period.
Required
a. Prepare a schedule of cost of goods sold.
b. Prepare a multistep income statement.
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