Skruggs Company began the 2013 accounting period with $20,000 cash, $76,000 inventory, $50,000 common stock, and $46,000 retained earnings. During 2013, Skruggs experienced the following events:

1. Sold merchandise costing $56,000 for $92,000 on account to Mark's Furniture Store. 
2. Delivered the goods to Mark's under terms FOB destination. Freight costs were $800 cash. 
3. Received returned goods from Mark's. The goods cost Skruggs $4,000 and were sold to Mark's for $5,900. 
4. Granted Mark's a $3,000 allowance for damaged goods that Mark's agreed to keep. 
5. Collected partial payment of $81,000 cash from accounts receivable. 

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. 
d. Why would Mark's agree to keep the damaged goods? Who benefits more?