Reference no: EM132531170

Question 1: Record the events in general journal format. Assume that the perpetual inventory method and gross method is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

At the beginning of Year 2, the Redd Company had the following balances in its accounts:

Cash$15,300

Inventory 7,500

Land 3,600

Common stock 14,000

Retained earnings 12,400

During Year 2, the company experienced the following events:

1. Purchased inventory that cost $12,800 on account from Ross Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $960 were paid in cash.
2. Returned $750 of the inventory it had purchased from Ross Company 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 $11,000 for $20,000 on account, under terms 2/10, n/45.
5. Received merchandise returned from a customer. The merchandise originally cost $2,000 and was sold to the customer for $2,700 cash. The customer was paid $2,700 cash for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $850 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Sold the land for $6,700.
9. Recognized accrued interest income of $500.
10. Took a physical count indicating that $4,700 of inventory was on hand at the end of the accounting period. (Hint: Determine the current balance in the inventory account before calculating the amount of the inventory write down.)