ABC Company Ltd

The following transactions for calendar year 2021 occurred for ABC Company.
ABC uses perpetual inventory. Income tax rate is 25%.
(A) Prepare T-Accounts or journal entries to record the transactions.
(B) Record all required year end entries and Compute Net Income.
(C) Prepare a classified Balance Sheet as of 12/31/2021.
(D) Prepare a multi-step Income Statement for 2021.
(E) Prepare a statement of Cash Flows for 2021. Use either the direct or
indirect method.

• Opening balances were as follow: Cash- $70,000,

• Accounts Receivable- $80,000,
• Inventory$30,000,
• Property, Plant \& Equipment- $500,000,
• Accumulated Depreciation- $300,000,
• Accounts Payable- $40,000,
• Common Stock- $90,000,
• Retained Earnings $250,000.
2. Paid insurance on 1/1/2021 of $40,000 for two years.
3. Purchased equipment for $200,000 paid $100,000 down and signed a two-
year, 6% note for the balance. Equipment was acquired on 7/1/2021.
4. Purchased $650,000 of inventory on account.
5. Made Sales on account of $900,000 and cash sales of $400,000 for the year.
Cost of Sales was $600,000.
6. Paid General expense salaries of $180,000, Restructuring costs of $40,000,
and Selling expenses of $25,000.
7. Paid $550,000 for the inventory purchased in Item 4.
8. Depreciation expense on equipment was $25,000 for the year.
9. Salaries earned in 2021 but not paid until 2022 amounts to $8000.
10. Purchased a short-term equity investment for $50,000 on November 1,
2021.
11. Paid Dividends of $90,000 on December 1, 2021.
12. Paid $100,000 to purchase a business component. The purchase is
recorded as goodwill. No amortization is required to be recorded.
13. Sold the business component purchased in 12 for $70,000. The component
had sales of $50,000 cost of sales of $30,000 and Salaries of $10,000. These
amounts are included in 5 above.
14. Collected $730,000 on the sales made in Item 5
15. Issued a purchase order to a vendor for $35,000 of inventory.