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 $ 44,700

Comparative Balance sheet of ABC Company are given below :

ABC COMPANY Comparative Balance Sheet December 31

__2020 2019 _

Current Assets Cash $58,200 $ 35,000 Accounts receivable 75,000 53,000 Inventories 120,000 132,000 Prepaid Rent 21,000 25,000 Prepaid Insurance 98,000 75,000 Non-Current Assets Plant assets 325,000 250,000 Accumulated depreciation (62,200) (60,000) Total Assets $635,000 $510,000

Current Liabilities Accounts payable $98,000 $ 75,000 Notes payable 21,000 24,000 Long-term Liabilities: Bank Loan 120,000 170,000 Stockholders Equity: Common stock 285,000 170,000 Retained earnings 111,000 71,000 Total Stockholders Equity $393,000 $251,000

Total Liabilities and Stockholders Equity $635,000 $510,000

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 $105,000 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: (i). Quick Ratio, (ii). Accounts receivables Turnover, (iii). Profit Margin, (iv). Return on Common Stockholders Equity, (v). Debt to Asset Ratio. (1 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.