Question - The account balances for Terry's Auto Shop as of January 1, 2016, are as follows:
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Account Titles
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Cash
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$6,150
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Inventory
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3,040
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Common Stock
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$7,380
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Retained Earnings
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1,810
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Total
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$9,190
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$9,190
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The following events affected the company during the 2016 accounting period:
1. Purchased merchandise on account that cost $4,110.
2. The goods In Event 1 were purchased FOB shipping point with freight cost of $295 cash.
3. Returned $410 of damaged merchandise for credit on account
4. Agreed to keep other damaged merchandise for which the company received an $265 allowance.
5. Sold merchandise for $4,940 cash that cost $2,580.
6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $120 cash.
7. Paid $2,890 on the merchandise purchased in Event 1.
Required - Prepare an income statement and balance sheet.