3. ABC COMPANY Income Statement For the Year Ended December 31, 2020 Sales $503,000 Less: Cost of goods sold $295,000 Operating expenses (excluding depreciation) 63,000 Depreciation expense 22,500 Income taxes 45,000 Interest expense 32,800 Net income S 44.700 Page 2 of 4 SHA1 Comparative Balance sheet of ABC Company are given below: December 31 2020 2019 Current Assets Cash Accounts receivable Inventories Prepaid Rent Prepaid Insurance S58,200 75,000 120,000 21,000 98,000 $ 35,000 53,000 132,000 25,000 75,000 Non-Current Assets Plant assets Accumulated depreciation Total Assets 325,000 (62.2001) $635.000 250,000 (60.000 S510.000 Current Liabilities Accounts payable Notes payable $98,000 21,000 $ 75,000 24,000 Long-term Liabilities: Bank Loan 120,000 170,000 Stockholder's Equity Common stock Retained earnings Total Stockholder's Equity 285,000 111.000 $393,000 170,000 - 7L000 $250,000 Total Liabilities and Stockholder's Equity S635.000 S510.000 SHA1 Additional information: 1. The current market price of one share/ stock of ABC Corporation is $13.88. 2. On 31 August, 2020, plant asset that was purchased three years back for $32,000 was sold for $12,000. On 31 August, 2020, the accumulated depreciation for the old plant asset was $10,000. 3. Common stock worth $115,000 was issued, due to which the company received $10,000 in cash. 4. New plant assets costing $107,000 were purchased for cash in 2020. 5. A portion of the bank loan was repaid in 2020. 6. A cash dividend of $15,000 was declared and paid during the year. Required a. Prepare a Statement of Cashflow, for the year ended 31 December 2020. (10 Marks) b. Calculate the following ratio for the year 2020: (1). Quick Ratio, (i). Accounts receivables Tumover, (i). Profit Margin, (iv). Retum on Common Stockholder's Equity, (v). Debt to Asset Ratio (I mark for formula 1 mark for calculation) (10 Marks) c. Calculate the amount of gain or loss ABC Company made after the disposal of the plant asset. Write the appropriate journal entry, (5 marks) 3. ABC COMPANY Income Statement For the Year Ended December 31, 2020 Sales $503,000 Less: Cost of goods sold $295,000 Operating expenses (excluding depreciation) 63,000 Depreciation expense 22,500 Income taxes 45,000 Interest expense 32,800 Net income S 44.700 Page 2 of 4 SHA1 Comparative Balance sheet of ABC Company are given below: December 31 2020 2019 Current Assets Cash Accounts receivable Inventories Prepaid Rent Prepaid Insurance S58,200 75,000 120,000 21,000 98,000 $ 35,000 53,000 132,000 25,000 75,000 Non-Current Assets Plant assets Accumulated depreciation Total Assets 325,000 (62.2001) $635.000 250,000 (60.000 S510.000 Current Liabilities Accounts payable Notes payable $98,000 21,000 $ 75,000 24,000 Long-term Liabilities: Bank Loan 120,000 170,000 Stockholder's Equity Common stock Retained earnings Total Stockholder's Equity 285,000 111.000 $393,000 170,000 - 7L000 $250,000 Total Liabilities and Stockholder's Equity S635.000 S510.000 SHA1 Additional information: 1. The current market price of one share/ stock of ABC Corporation is $13.88. 2. On 31 August, 2020, plant asset that was purchased three years back for $32,000 was sold for $12,000. On 31 August, 2020, the accumulated depreciation for the old plant asset was $10,000. 3. Common stock worth $115,000 was issued, due to which the company received $10,000 in cash. 4. New plant assets costing $107,000 were purchased for cash in 2020. 5. A portion of the bank loan was repaid in 2020. 6. A cash dividend of $15,000 was declared and paid during the year. Required a. Prepare a Statement of Cashflow, for the year ended 31 December 2020. (10 Marks) b. Calculate the following ratio for the year 2020: (1). Quick Ratio, (i). Accounts receivables Tumover, (i). Profit Margin, (iv). Retum on Common Stockholder's Equity, (v). Debt to Asset Ratio (I mark for formula 1 mark for calculation) (10 Marks) c. Calculate the amount of gain or loss ABC Company made after the disposal of the plant asset. Write the appropriate journal entry
