Problem: At the beginning of 2005, the C. Eaton Company had the following balances in its accounts:
Cash $6,500
Inventory $9,000
Retained Earnings $15,500
During 2005, the company experienced the following events.
1. Purchased inventory with a list price of $3,000 on account from Blue Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight cost of $150 was paid in cash.
2. Returned $300 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 but not within the cash discount period.
4. Sold inventory with a list price of $6,000 and a cost of $3,500 on account, under terms 2/10, n/45.
5. Received returned merchandise from a customer. The merchandise originally cost $400 and was sold to the customer for $650 cash. The customer was paid $650 cash for the returned merchandise.
6. Delivered merchandise in Event 4 FOB destination. Freight costs of $80 were paid in cash.
7. Collected the amount due on the account receivable but not within the discount period.
8. Took a physical cost indicating that $8,300 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. Prepare an income statement, a statement of changes in stockholders' equity, a balance sheet, and a statement of cash flows.