HOME FURNISHINGS Effect of Events on the Financial Statements Balance Sheet Income Statement Statement of Cash Flows Assets = Liabilities + Stockholders' Equity Events Merchandise Revenue - Expenses =...

Extracted text: HOME FURNISHINGS Effect of Events on the Financial Statements Balance Sheet Income Statement Statement of Cash Flows Assets = Liabilities + Stockholders' Equity Events Merchandise Revenue - Expenses = Net Income Common Stock Accounts Retained Cash %3D Inventory Payable Earnings Paid accounts payable OA


Extracted 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?