Required information Exercise 3-7A (Static) Effect of purchase returns and allowances and freight costs on the financial statements: Perpetual system LO 3-2, 3-3, 3-4 [The following information applies to the questions displayed below.] The beginning account balances for Terry's Auto Shop as of January 1, Year 2, follow: Account Titles Cash Inventory Common Stock Retained Earnings Beginning Balances $16,000 8,000 20,000 4,000 The following events affected the company during the Year 2 accounting period: 1. Purchased merchandise on account that cost $15,000. 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 a $1,100 allowance. 5. Sold merchandise that cost $15,000 for $31,000 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. Complete this question by entering your answers in the tabs below. Income Statement Statement of Cash Flows Prepare an income statement. TERRY'S AUTO SHOP Income Statement For the Year Ended December 31, Year 2 Operating expenses 0 $ 0 Complete this question by entering your answers in the tabs below. Income Statement Statement of Cash Flows Prepare a statement of cash flows. (Amounts to be deducted should be indicated with a minus sign.) TERRY'S AUTO SHOP Statement of Cash Flows For the Year Ended December 31, Year 2 Cash flow from operating activities: Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities: Net change in cash $ 0 Ending cash balance $ 0