Difference does or does not exist between net income

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Reference no: EM13933404

The trial balance for Austin's Auto Shop as of January 1, 2013, follows:

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The following events affected the company during the 2013 accounting period:

1. Purchased merchandise on account that cost $12,000. 
2. The goods in Event 1 were purchased FOB shipping point with freight cost of $800 cash. 
3. Returned $2,600 of damaged merchandise for credit on account. 
4. Agreed to keep other damaged merchandise for which the company received an $1,100 allowance. 
5. Sold merchandise that cost $12,000 for $21,500 cash. 
6. Delivered merchandise to customers in Event 5 under terms FOB destination with freight costs amounting to $500 cash. 
7. Paid $8,000 on the merchandise purchased in Event 1. 

Required: 

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 an income statement, balance sheet, and statement of cash flows. (Assume that closing entries have been made.) 
d. Explain why a difference does or does not exist between net income and net cash flow from operating activities.

Reference no: EM13933404

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