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Product Code: ACC MISC Work
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Powell Company began the 2016 accounting period with $40,000 cash, $86,000 inventory,
$60,000 common stock and $66,000 retained earnings. During 2016, Powell experienced the following events:
1. Sold merchandise costing $58,000 for $99,500 on account to Prentise Furniture Store.
2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $900 cash.
3. Received returned goods from Prentise. The goods cost Powell $4,000 and were sold to Prentise for $5,900.
4. Granted Prentise a $3,000 allowance for damaged goods that Prentise agreed to keep.
5. Collected partial payment of $81,000 cash from accounts receivable.
a. Record the events in general journal format.
b. Open general ledger T-accounts with the appropriate beginning balances and post the journal entries to the T-accounts.
c. Prepare a multistep income statement, a balance sheet, and a statement of cash flows.
d. Why would Prentise agree to keep the damaged goods? Who benefits more?