Transcribed Image Text: HOME FURNISHINGS
Effect of Events on the Financial Statements
Balance Sheet
Income Statement
Events
Assets
= Liabilities +
Stockholders Equity
Statement of
Net
Income
Revenue
Expenses =
Cash Flows
Common
Stock
Merchandise
Accounts
Retained
Cash
Inventory
32.000 =
Payable
32,000
Earnings
Purchase inventory
0 +
ol-
Return inventory
?+
?-
0 =
Record discount
Paid accounts
payable
?+
0-
0 =
(24,541)+
(24,541) +
?+
?-
0 =
(24,541) OA Transcribed Image Text: Powell Company began the Year 3 accounting period with $45,000 cash, $91,000 inventory, $65,000 common stock, and $71,000
retained earnings. During Year 3, Powell experienced the following events:
1. Sold merchandise costing $60,500 for $104,500 on account to Prentise Furniture Store.
2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $1,200 cash.
3. Received returned goods from Prentise. The goods cost Powell $4,500 and were sold to Prentise for $6,800.
4. Granted Prentise a $3,500 allowance for damaged goods that Prentise agreed to keep.
5. Collected partial payment of $85,500 cash from accounts receivable.
Required
a. Record the events in a statements model shown below.
b. Prepare an income statement, a balance sheet, and a statement of cash flows.
c. Why would Prentise agree to keep the damaged goods?
