Reference no: EM132609412
Question a) Alaina's Bandana Corporation (ABC) is in its first year of operations. Using the information below, prepare year-end income statement and balance sheet for the business (Remember to increase/reduce equity by the amount of income/loss).
1. Through 2020, ABC purchased 5,000 bandanas at an average cost of $2 per bandana. Alaina marked up her bandanas to 2.5 times purchase price and sold all items in the same year. On December 31st, Alaina had $5,950 cash in her corporate bank account and no remaining inventory, so she ordered 2,000 bandanas on account at a cost of $2.10 each (they were delivered to her the same day).
2. Alaina is paid a monthly salary of $1,000 from ABC. Also, she rents a sales booth on weekends, so she can sell bandanas in person (in addition to online). The booth costs her $500 per month.
3. At the start of the year, Alaina invested $5,000 into her business (100 common shares). She also obtained a bank loan of $5,000 (ABC has only paid annual interest of 5%). Other than the bank loan and Dec 31st accounts payable balance, ABC holds no debts.
4. At the start of the year, Alaina purchased furniture for $3,000 (expected life of 15 years with no salvage value) and sewing equipment for $2,000 (expected life of 10 years with no salvage value). Both assets are depreciated using the straight-line method.