Hero Inc., a merchandising company, has begun its business since 1 Jan. 2017. The selected information from the accounting records on 1 Jan. 2021 is as follows. The account of Retained Earnings has a credit balance of $141,000. Stockholder's Equity Section: Preferred Stock: 4% cumulative, $16 par value, 5,000 shared authorized, 2,000 shares issued and outstanding $32,000 Additional Paid in Capital, Preferred Stock $8,000 Common Stock: $6 par value, 20,000 shares authorized, 10,000 shares $60,000 issued and outstanding Additional Paid in Capital, Common Stock $20,000 The company uses a perpetual inventory system and LIFO for its inventory, reporting the beginning inventory as follows: 500 units at a unit cost of $51 (purchased on 4 Dec. 2020) 300 units at a unit cost of $54 (purchased on 25 Dec. 2020) The following transactions occurred during the 1st quarter of 2021 (1 Jan-31 Mar). 1 Jan 5 Jan 16 Jan 18 Jan 29 Jan 2 Feb 6 Feb 8 Feb 11 Feb 17 Feb 21 Feb Purchased a building and computers for $156,600 and signed a promissory note for the purchase. The appraisal values are: $90,000 for the building and $30,000 for the computers. The company also paid $5,250 for installations of computers. Issued 6,000 shares of common stock at a price of $9 per share. Sold 380 units of inventory to Aeon at a unit selling price of $140 by cash. Purchased 400 units of inventory from Dover Inc at a unit cost of $58 by cash. Purchased 3,000 shares of its own common stock for $11 per share. Purchased 800 units of inventory from Rye Inc. at a unit cost of $61 on credit terms 4/20, n/90. Wrote off a $4,300 customer's account balance, using the allowance method. Return 350 units of inventory purchased on 2 Feb to Rye Inc for a full credit refund. Sold 950 units of inventory to Westlake at a unit selling price of $148 on credit terms 6/20, n/90. Paid for the credit purchase on 2 Feb. Westlake returned 200 units of inventory purchased on 11 Feb for a full credit refund. Each unit has an original unit cost of $61. 7 Mar Sold 1,500 of its treasury shares at $14 per share. 20 Mar 25 Mar 31 Mar Declared dividends of $20,000 to be paid in July 2022. The company did not declare dividends in 2019 and 2020. Paid $33,978 of operating expenses. Received $2,900 for a sale of a machine. This machine was purchased on 1 Jan 2018 for $17,010. The units-of-production method is used for this machine. The company expected to use this machine a total of 9,600 hours, with a residual value of $810. It was used 2,400 hours in 2018, 1,440 hours in 2019, 1,800 hours in 2020 and 1,200 hours in the 1st quarter of 2021. Additional information for adjustments 1. To depreciate the building purchased on 1 Jan. 2021, the company uses the straight-line method over 20 years, with a residual value of $15,450. For the computers purchased on 1 Jan. 2021, the company uses the double declining balance method. It is expected to be used for 4 years, with the residual value of $2,500. 2. The company uses the Aging of Accounts Receivable method to estimate bad debts. The company has the following information of the past-due receivables amounts as at 31 March 2021. Customer Celly Inc. Haskel Amount (S) 16,500 Due Date 20 Feb. 2021 21,700 5 Dec. 2020 Based on past experiences, a manager has estimated the rates of bad debt losses as follows: Not yet due Number of Days Past-due 1-30 31-60 >60 Estimated Uncollectible % 1% 7% 17% 27% The account of Allowance for Doubtful Accounts has a $5,984 credit balance on 1 Jan. 2021. Instructions: 1. Prepare journal entries to record the transactions during the 1st quarter of 2021. (48 marks) 2. Assume that depreciation expenses are to be recorded at the end of each quarter or on an asset-disposal date. Prepare adjusting entries to record the depreciation expenses incurred during the 1st quarter of 2021. (7 marks). 3. Prepare an adjusting entry to record the estimated bad debts on 31 March 2021 (6 marks). 4. Prepare the section of Stockholders' Equity to be reported on Balance Sheet as at 31 March 2021 (14 marks). ID