Powell Company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000 a. Record the events
Question:
Powell Company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000
a. Record the events in a statements model like the one shown as follows. common stock, and $66,000 retained earnings. During 2018, Powell experienced the following events:
1. Sold merchandise costing $58,000 for $99,500 on account to Prentise Furniture Store.
2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $900 cash.
3. Received returned goods from Prentise. The goods cost Powell $4,000 and were sold to Prentise for $5,900.
4. Granted Prentise a $3,000 allowance for damaged goods that Prentise agreed to keep.
5. Collected partial payment of $81,000 cash from accounts receivable.
Required
a. Record the events in a horizontal statements model like the following one.
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b. Prepare an income statement, a balance sheet, and a statement of cash flows.
c. Why would Prentise agree to keep the damaged goods? Who benefits more?
Step by Step Answer:
a PowellCompany Effect of Events on the Financial Statements Assets Equity Rev Exp Net Inc Cash Flow No Cash A Rec Inv C Stock Ret Earn Bal 40000 NA 8...View the full answer
Survey of Accounting
ISBN: 978-1259631122
5th edition
Authors: Thomas Edmonds, Christopher Edmonds, Philip Olds, Frances McNair, Bor Yi Tsay
