ABC Company was awarded a bid to build an energy-efficient motor for a large government heating and cooling project. The requirements of the project included a timeline of one year to build and deliver the system. In order to provide a quality product and stay within the time requirements, ABC Company set up a organization, whereby employees from various functions of the business would join a team to see this project through, from start to finish. Upon completion, the team would disband and members would return to their respective functional units.

Powell company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. during 2018, powell experienced the following events: sold merchandise costing $58,000 for $99,500 on account to prentise furniture store. delivered the goods to prentise under terms fob destination. freight costs were $900 cash. received returned goods from prentise. the goods cost powell $4,000 and were sold to prentise for $5,900. granted prentise a $3,000 allowance for damaged goods that prentise agreed to keep. collected partial payment of $81,000 cash from accounts receivable. required record the events in a statements model shown below. prepare an income statement, a balance sheet, and a statement of cash flows. why would prentise agree to keep the damaged goods?