Question

3. On March 1, 2019 – An investor purchased 100 shares of stock (100%) from ABC Co. for $1,500,000 cash. The par value of the stock was $1/share. ABC Company purchased equipment for $90,000; paying $40,000 and financing (through a long-term note) the remaining portion. The note charges 12% (APR) interest. ABC had the following transactions after 3/1/2019: Sold and delivered services for $820,000. $460,000 cash was received immediately and the remaining amounts will be received in 2020. ABC was given in cash $60,000 for future services. The services are to be provided to the client in 2020. ABC paid $50,000 for advertising. The advertising was already displayed and incurred. ABC paid $100,000 for supplies. Cash was paid for both. Paid salaries in total of $200,000 for work already done. ABC received a $20,000 bill for utilities it had used in 2019. The bill will be paid in 2020. The amount of depreciation that needs to be recorded for the equipment (related to above) is $9,000. The new person counted supplies and determined that only$20,000 of supplies remained at year-end. ABC declared and paid a dividend of $20,000. The tax rate is 20% but the tax will not be paid until 2020. Prepare JEs, a balance sheet and Income Statement in good form for the year-ended 2019 for ABC Co. Round all non-round values to the nearest dollar.

Answer 1

Journal Entries - Tor year ended 2019 ABC Co. for (All figures in & Cash On D 1500,000 To equiry share capital ale 100. To Share Premium are 14, 99, 900 eing cash received from selling of it's own stock) Equipment ale pr. 90,000 To cash are 4., оор Tolong term hole alco, 000 (Being Puronse of equipment in cash as balance from Long term Note). Account Receivables ac. Dr. 9,20,000 TO sale of Sevices (senvicer rendered) ac (Being services rendered recorded) 8.20,000 Cash ale Dr. 4.60,000 TO Account receivables OC 4,60,000 cash received immediatly from rendersing of services) (Being Cash TO . (Being ale Dr. 60,000 Advance for services alc cash received for rendering 60.000 services on furene dote) TNote- 1 Advertising expenses Qc DY. 50,000 To cash alc s0,000 (Being amount paid for Advertising Expenses). supplies (Purchase) al Dr. 100.000 To cash ale 100.000 ( Being Purchase made during the year paid for Cash) Salary. I salaries alc Do 200000 To cash alc 200,000 . (Being salary paid in Cash, as nothing mentioned about Bank)

(All figures are in $) Utilities al Dr. 20,000 To casch alc 20,000 (Being expenses paid in cash) Depridaton Qic Dr You 9000 To Equipment alc 9000 (Being depriciation recorded for current year use) I Note: 20.000 4000 (ie 20% of 20000) Dividend al Dr. 24,000 To Dividend payable al - To Tax on Dividend al ( Being Dividend expense recorded Dividend payable ala Dr. 20.000 To cash ale (Being dividend paid in cash). Notes Related to Journal Entries & Note-1 since cash is used in all transaction we have made in this question, Hence we have wed cash in all those transaction where it was not specific, whether these transaction are cash or from Bank -Note-2 correction of entry No. 22 iX Dividend alc Dr. 20,000 To Dividend payable alc. 20,000 Being dividend Expenses recorded) i) Tax Expenses al Dr. 91,200. TO Tax Payable al 91,200 Being tax on total net Income recoroled) lie 20% of ASL Entry No 13 Interest on APR alcor 5000 To 12% Long term loan CARR) 5000 (Being Interest on APR recorded for the period 1.03.2019 to 31.12.2019' re lo month)

Sralement for Year End Sala 8- Jncome opening stock Supplies Gross Pront ܠ To To To - - ܢܣܘܢܥ ܢ 10.000 7, 40.000 By closing stock S S40.00 I Cross POAT To To To TO To To salaries Advertising Expenses turies Depriciation Interest on APR profit Before tar 50.000 20.000 - 5ooo 456,000 74 COD By Pron't Before fax 456.000 14000 To Tox on Jncome. (20) - 456000 TO proht after tar 964 SOD 456,000 To Dividend 20000 To (Adel' to shareholderul) 34.4800 le capital By proht allertar 456000 364,800 feloven

Jiguses Phareholaust fund Balance sheet of ABC Co. for gear ended 2019 ($) Share capital 100 Fixed Asset Share Premium 14,99.900 equipment 90,000 Income from Income statement no - De Pacaron 344,800 9001 .GOD Current Asset Long term Liabilities Account Receivables ③ 360,000 12%. АPR O 55,000 Supplies in stock 20,600 current liabilities cash 3 1590,00 Advance for services 60.000 Tax on Income 91,200 26, SH,000 20,51,000 Noles (Amount in $) term ARR Long t soooo Sooo Interest SS.000 Accocent receivables 20,000 ( realised immidictly (460000 360,000 ( (+ (+) (-) cash received from sale of own stock pould for equipment realised from Debtoss Advance for sexvices. paid for expenses Cadvertising, salanies, Orisities) ( 5000 + 200000 + 20000) paid for supplies paid for Dividend closing Balance at Year End IS09000 (40.000) 460,000 Go,000 (270 poo) (-) (a (100 ml) (2009) is 90,000
The images have been attached in series of 1-3 pages and a additional income statement has been given.you are requested to not to consider the entry no.11 but to consider it's correction in note no. 2 on page no.2.

1. The balance sheet and income statement have been provided in T shape,it could have been in statement shape.
2. since all the expenses have been made in cash,hence we have also made some transaction in cash.