Reference no: EM13933333
Skruggs Company began the 2013 accounting period with $20,000 cash, $76,000 inventory, $50,000 common stock, and $46,000 retained earnings. During 2013, Skruggs experienced the following events:
1. Sold merchandise costing $56,000 for $92,000 on account to Mark's Furniture Store.
2. Delivered the goods to Mark's under terms FOB destination. Freight costs were $800 cash.
3. Received returned goods from Mark's. The goods cost Skruggs $4,000 and were sold to Mark's for $5,900.
4. Granted Mark's a $3,000 allowance for damaged goods that Mark's agreed to keep.
5. Collected partial payment of $81,000 cash from accounts receivable.
Required:
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.
d. Why would Mark's agree to keep the damaged goods? Who benefits more?
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