Cash
Inventory
Common stock
Retained earnings
$ 8,800
2,800
8,300
3,300
During Year 2, the company experienced the following events:
1. Purchased inventory that cost $6,300 on account from Ross Company under terms 2/10, n/30. The merchandise was
delivered FOB shipping point. Freight costs of $580 were paid in cash.
2. Returned $400 of the inventory that it had purchased because the inventory was damaged in transit. The seller agreed
to pay the return freight cost.
3. Paid the amount due on its account payable to Ross Company within the cash discount period.
4. Sold inventory that had cost $6,800 for $9,800 on account, under terms 2/10, n/45.
5. Received merchandise returned from a customer. The merchandise originally cost $580 and was sold to the customer
for $880 cash. The customer was paid $880 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $680 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Took a physical count indicating that $2,500 of inventory was on hand at the end of the accounting period.
Problem 3-26A (Algo) Part b
b. Use a horizontal financial statements model to show how each event affects the balance sheet, income statement, and statement of
cash flows. More specifically, record the amounts of the events into the model. Also, in the Statement of Cash Flows column, classify
the cash flows as operating activities (OA), investing activities (IA), or financing activities (FA).
