Cain Company began the 2011 accounting period with \(\$ 18,000\) cash, \(\$ 60,000\) inventory, \(\$ 50,000\) common stock, and \(\$ 28,000\) retained earnings. During the 2011 accounting period, Cain experienced the following events:

1. Sold merchandise costing \(\$ 38,200\) for \(\$ 74,500\) on account to Jones's General Store.

2. Delivered the goods to Jones under terms FOB destination. Freight costs were \(\$ 400\) cash.

3. Received returned goods from Jones. The goods cost Cain Company \(\$ 2,000\) and were sold to Jones for \(\$ 3,800\).

4. Granted Jones a \(\$ 1,000\) allowance for damaged goods that Jones agreed to keep.

5. Collected partial payment of \(\$ 52,000\) 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 Cain grant the \(\$ 1,000\) allowance to Jones? Who benefits more?