During 2012, the company experienced the following events.
Cash 4,300
Inventory 9,000
Common stock 10,000
Retained earnings 3,300
1. Purchased inventory that cost 2,200 on account from Blue Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $110 were paid in cash.
2. Returned $200 of the inventory that it had purchased because the inventory was damaged in transit. The freight company agreed to pay the return freight cost.
3. Paid the amount due on its account payable to Blue Company within the cash discount period.
4. Sold inventory that had cost $3,000 for $5,000 on account, under terms 2/10, n/45.
5. Received merchandise returned from a customer. The merchandise originally cost $400 and was sold to the customer for $710 cash during the previous account period. The customer was paid $710 for the returned merchandise.
6. Delivered goods FOB destination in Event 4. Freight costs of $60 were paid in cash.
7. Collected the amount due on the account receivable within the discount period.
8. Took a physical count indicating that $7,970 of inventory was on hand at the end of the accounting period.
Required:
A. Identify these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE).
B. Record each event in a statements model like the following one.
C. Prepare and income statement, a statement of change in stockholders' equity, a balance sheet, and a statement of cash flows.