Problem 3-25Comprehensive cycle problem: Perpetual system
At the beginning of 2012, the Jeater Company had the following balances in its accounts:
During 2012, the company experienced the following events.
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. (Edmonds. Survey of Accounting. 2012)
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 $5,500 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 accounting period. The customer was paid $710 cash 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.
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. (Edmonds. Survey of Accounting. 2012).
c. Prepare an income statement, a statement of changes in stockholder’ equity, a balance sheet, and a statement of cash flows.
Problem 4-23Bank reconciliation and internal control