The trial balance for Austin s Auto Shop as of January
The trial balance for Austin’s Auto Shop as of January 1, 2013, follows:

The following events affected the company during the 2013 accounting period:
1. Purchased merchandise on account that cost $12,000.
2. The goods in Event 1 were purchased FOB shipping point with freight cost of $800 cash.
3. Returned $2,600 of damaged merchandise for credit on account.
4. Agreed to keep other damaged merchandise for which the company received an $1,100 allowance.
5. Sold merchandise that cost $12,000 for $21,500 cash.
6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $500 cash.
7. Paid $8,000 on the merchandise purchased in Event 1.

a. Record the events 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. (Assume that closing entries have been made.)
d. Explain why a difference does or does not exist between net income and net cash flow from operatingactivities.
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