Question

Hollis Company began the 2016 accounting period with $36,000 cash, $80,000 inventory, $70,000 common stock, and $46,000 retained earnings. During the 2016 accounting period, Hollis experienced the following events:
1. Sold merchandise costing $51,500 for $92,900 on account to RJ’s General Store.
2. Delivered the goods to RJ’s under terms FOB destination. Freight costs were $500 cash.
3. Received returned goods from RJ’s. The goods cost Hollis Company $3,200 and were sold to RJ’s for $4,700.
4. Granted RJ’s a $1,500 allowance for damaged goods that RJ’s agreed to keep.
5. Collected partial payment of $71,000 cash from accounts receivable.
Required
a. Record the transactions in general journal format.
b. Open general ledger T-accounts with the appropriate beginning balances and post the journal entries to the T-accounts.
c. Prepare an income statement, balance sheet, and statement of cash flows.
d. Why would Hollis grant the $1,500 allowance to RJ’s? Who benefits more?


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  • CreatedApril 20, 2015
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