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DEF Ltd. has the following balances as of July 31, 2023: Cash: $12,500 Accounts Receivable: $9,000 Inventory: $20,000 Accounts Payable: $7,000 Salaries Payable: $2,500 Vehicles:

DEF Ltd. has the following balances as of July 31, 2023:

  • Cash: $12,500
  • Accounts Receivable: $9,000
  • Inventory: $20,000
  • Accounts Payable: $7,000
  • Salaries Payable: $2,500
  • Vehicles: $40,000
  • Accumulated Depreciation: $6,000
  • Bonds Payable: $25,000
  • Common Stock: $15,000
  • Retained Earnings: $26,000

Requirements:

  1. Prepare a trial balance.
  2. Make adjusting entries for:
    • Depreciation expense: $2,000
    • Inventory adjustment: $1,500
  3. Prepare an adjusted trial balance.
  4. Create a statement of cash flows.
  5. Discuss how inventory adjustments affect financial statements.

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