ACCOUNTING Problem 3-24

Problem 3-24Effect of purchase returns and allowances and purchase discounts onthe financial statements: perpetual systemThe following events were completed by Chan’s Imports in September 2012.-Sept. 1 Acquired $60,000 cash from the issue of common stock.-Sept. 1 Purchased $36,000 of merchandise on account with terms 2/10, n/30.-Sept. 5 Paid $800 cash for freight to obtain merchandise purchased on September 1.-Sept. 8 Sold merchandise that cost $20,000 to customers for $38,000 on account, with terms 2/10, n/30.-Sept. 8 Returned $1,500 of defective merchandise from the September 1 purchase to the supplier.-Sept. 10 Paid cash for the balance due on the merchandise purchased on September 1.-Sept. 20 Received cash from customers of September 8 sale in settlement of the account balances, but not within the discount period.30 Paid $4,900 cash for selling expenses.Required:a. Record each event in a statements model like the following one. The First event is recorded as an example.(See attached image for example of graph)b. Prepare an income statement for the month ending September 30.c. Prepare a statement of cash flows for the month ending September 30.d. Explain why there is a difference between net income and cash flow from operating activities.

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