Powell Company began the Year 3 accounting period with $48,000 cash, $94,000 inventory, $68,000 common stock, and $74,000 retained earnings. During Year 3, Powell experienced the following events:
Sold merchandise costing $62,000 for $107,500 on account to Prentise Furniture Store.
Delivered the goods to Prentise under terms FOB destination. Transportation costs were $900 cash. Received returned goods from Prentise.
The goods cost Powell $4,800 and were sold to Prentise for $6,400.
Granted Prentise a $3,800 allowance for damaged goods that Prentise agreed to keep.
Collected partial payment of $88,500 cash from accounts receivable.
Required a. Record the events in a horizontal financial statements model.
b. Prepare an income statement, a balance sheet, and a statement of cash flows.
