****I have been trying to solve this problem for days, yet I am unable to get my balance sheet to balance. HELP PLEASE!!!*****

The unadjusted pre-closing 12/31/20 account balances for the Maloney Company are listed below:

Net Sales	$12,540
Net Purchases	9,000
Selling Expenses	424
Cash	487
Machines	6,019
Accumulated Depreciation, Machines	2,154
Accounts Payable	1,445
Retained Earnings	4,182
Allowance for Doubtful Accounts	60
Building	4,800
Accumulated Depreciation, Building	468
Common Stock	4,760
Accounts Receivable	2,877
Depreciation Expense, Machines	1,077
Inventory @ 1/1/20 (periodic method used)	925

During your audit, you discover the following four items that have yet to be recorded:

No depreciation on the building has been recorded in 2020. Depreciation on the building is based on Double-Declining Balance. It was purchased on 1/1/18 and has an estimated useful life of 40 years. The estimated salvage value is $1,000.

Maloney exchanged a machine for a similar machine on 12/31/20. The original machine cost $3,429 and had a book value of $2,134. The new machine had a fair value of $1,823; Maloney also received $511 in cash. The exchange lacked commercial substance.

Maloney uses the Income Statement approach to record Bad Debts. Bad Debts in 2020 are estimated to be 4% of Sales.

Ending Inventory is to be estimated using the Gross Profit Method. The historic Gross Profit percentage is 20%.

Required

Record journal entries for items #1-#3 above; show supporting computations. In addition, compute ending inventory per #4 above; show supporting computations. Assume adjusting/closing entries to adjust inventory, close Purchases, and Record CGS were properly made.

Draft the 2020 Condensed Income Statement and the 12/31/20 Balance Sheet. Use the Cabrera (Textbook Illustration 4-3 in Chapter 4) and the Uptown Cabinet (Textbook Illustration 3-41 in Chapter 3) format examples in the text. Assume no taxes. Do not include EPS.

WHAT I HAVE SO FAR:

1) Depreciation: Double Declining Balance

Building Cost: $4,800

Useful Life: 40 years

DDB Rate: (1/40) x 2 = .05

$4,800 x .05 = $240 Depreciation Expense for 2020

Journal Entry:

Depreciation Expense $240

Accumulated Depreciation - Building $240

2) Asset Exchange

$ 3,429 (Cost of Old Machine)

(2,134) (BV of Old Machine)

1,295 (Accumulated Depreciation of Old Machine)

$1,823 FMV of New Asset

(2,134) BV of Old Asset

-$311 Loss on Exchange

Journal Entry:

Cash $511

New Asset (plug) 1,312

A/D 1,295

Loss 311

Old Asset $3,429

3) Bad Debts

Net Sales: $12,540

Bad Debts: 4% of Sales

$12,540 x .04 = $501.60 (round to $502)

Journal Entry:

Bad Debt Expense $502

Allowance f/ Doubtful Accounts $502

4) Ending Inventory

Net Sales $12,540

Gross Profit 20%

Cost of Goods Sold (COGS) 80%

$12,540 x .8 = $10,032 COGS

BB Inventory 925

+ Purchases + 9,000

- EB Inventory - 107 (plug)

COGS $10,032

Condensed Income Statement

Maloney Company

Year Ended December 31, 2020

Net Sales $12,540

Cost of Goods Sold (10,032)

Gross Profit 2,508

Less:

Selling Expenses $424

Bad Debts 502

Depreciation Expense - Machine 1,077

Depreciation Expense - Building 240

Loss on Exchange of Machine 311 2,554

Net Loss -$46

Condensed Balance Sheet

Current Assets

Cash ($487+511) $998

Accounts Receivable 2,877

Less Allowance f/ Doubtful Accounts (60+502) (562) 2,315

Inventory 107

Total Current Assets 3,420

Long-term Assets

Building $4,800

Less Accumulated Depreciation (468+240) (708) 4,092

Machines ($1,312+6,019-3,429) 3,902

Less Accumulated Depreciation (2,154-1,295) (859) 3,043

Net Long-term Assets 7,135

Total Assets $10,555

Liabilities

Accounts Payable $1,445

Common Stock 4,760

Retained Earnings 4,182

Less: Net Loss (46)

Total Liabilities and Stockholders Equity $10,341