At The Beginning Of 2012, The Jeater Company Had The Followi

At The Beginning Of 2012 The Jeater Company Had The Following Balance

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 $2,000 on account from Blue Company under terms 1/10, n/30. The merchandise was delivered FOB shipping point. Freight cost 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. Recieved merchandise returned from a customer. The merchandise orignally 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 goos FOB destination in event 4. Freight cost 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 te end of the accounting period. REQUIRED a.Indentify these events as assets source (AS), asset use (AU), Asset exchange (AE), or claims exchange (CE) b.Record each event in a statements model like the following. C. Prepare an income statement, a statement of change in stockholders' equity, a balance sheet, and a statemet of cash flows.

Paper For Above instruction

The following paper provides a comprehensive analysis and recording of the financial events experienced by Jeater Company during the year 2012. It includes identifying the nature of each transaction, journal entries in accordance with accounting standards, and preparing the fundamental financial statements: income statement, statement of changes in stockholders’ equity, balance sheet, and cash flow statement.

Part A: Identification of Events as Assets Source (AS), Asset Use (AU), Asset Exchange (AE), or Claims Exchange (CE)

Understanding the nature of each transaction is essential for accurate recording and reporting. These transactions can be classified as asset source, asset use, asset exchange, or claims exchange based on their impact on the company's financial position.

Transaction 1:

Purchase inventory costing $2,000 on account from Blue Company, with terms 1/10, n/30, delivered FOB shipping point. This increases inventory (asset), and accounts payable (liability). The freight cost of $110 paid in cash increases inventory. Since this is a purchase, it can be classified as an assets source (AS) because it increases assets.

Transaction 2:

Return of $200 inventory damaged in transit. The inventory decreases (asset), and the freight company agrees to pay return freight, which affects the company’s expenses. This is an asset exchange (AE), as inventory decreases and liabilities or cash decrease accordingly.

Transaction 3:

Payment of the amount due to Blue Company within the discount period. This decreases cash and accounts payable, with no change in assets' total value; it is an asset use (AU) as cash is used to settle liabilities.

Transaction 4:

Sale of inventory costing $3,000 for $5,500 on account under terms 2/10, n/45. The sale increases accounts receivable (asset) and cash (if paid immediately), and the cost of goods sold increases expenses, reducing net income. This is an asset exchange (AE).

Transaction 5:

Return of merchandise originally costing $400 and sold for $710 cash. The inventory increases (asset), and the receivable or cash decreases, reflecting claims exchange (CE) as the receivable is settled with cash, and inventory is restored.

Transaction 6:

Delivery of goods FOB destination, with freight paid of $60 in cash. Since FOB destination implies the seller bears the freight cost, it's an asset exchange (AE)—inventory decreases or is affected accordingly, and cash decreases.

Transaction 7:

Collection of receivable within the discount period. Cash increases, receivables decrease. This is an asset exchange (AE).

Transaction 8:

Physical inventory count indicates $7,970 on hand at period-end. This count updates the inventory valuation, representing an asset exchange (AE).

Part B: Recording of Each Event in Journal Entries

Dr Inventory $2,110
Cr Accounts Payable $2,000
Cr Cash $110

Dr Accounts Payable $200
Cr Inventory $200

Dr Accounts Payable $1,800
Cr Cash $1,782  (assuming 1% discount on $1,800)
Cr Inventory $18  (merchandise discount)

Dr Accounts Receivable $5,500
Cr Sales Revenue $5,500
Dr Cost of Goods Sold $3,000
Cr Inventory $3,000

Dr Inventory $400
Cr Cost of Goods Sold $400
Dr Accounts Receivable $710
Cr Cash $710

Dr Freight Expense $60
Cr Cash $60

Dr Cash $5,500
Cr Accounts Receivable $5,500

Part C: Financial Statements Preparation

Income Statement for the Year Ending 2012

The income statement summarizes revenues and expenses incurred during 2012. Revenue includes sales of $5,500, minus discounts and returns. Cost of goods sold totals $3,000. Gross profit is calculated by subtracting COGS from sales. Operating expenses include freight and other expenses. The net income reflects the company's profitability.

Income Statement

• Sales Revenue: $5,500
• Less: Sales Returns and Allowances: $710
• Net Sales: $4,790
• Cost of Goods Sold: $3,000
• Gross Profit: $1,790
• Operating Expenses: $170 (Freight and other expenses)
• Net Income: $1,620

Statement of Changes in Stockholders' Equity

Reflects the beginning balance, additions for net income, and distributions if any. Since no dividends are noted, net income increases retained earnings.

Balance Sheet as of Year End 2012

Assets include inventory valued at $7,970, accounts receivable, and cash. Liabilities include accounts payable. Equity includes retained earnings increased by net income.

Statement of Cash Flows

Operating activities: Cash received from customers, paid suppliers, and freight expenses. Investing activities: Purchases of inventory. Financing activities: Payments of accounts payable. The net change in cash is calculated accordingly.

Conclusion

Proper classification and recording of transactions ensure accurate reflection of Jeater Company's financial performance and position for 2012. The analysis underscores the importance of meticulous journal entries, understanding transaction nature, and preparing comprehensive financial statements in accordance with accounting standards.

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