McCadden Company started business on January 1, 2020. The following transactions and events occurred in 2020 and 2021. For simplicity, information for sales, inventory purchases, collections on account, and payments on account is given in summary form at the end of each year.

1. Prepare all journal entries and record the information for 2021. Also prepare any necessary adjusting entries.

2. Prepare a trial balance as of December 31, 2021. (As you compute the amounts to include in the trial balance, don't forget the beginning balance left over from 2020.)

3. Prepare a classified income statement for the year ended December 31,2021, a classified balance sheet as of December 31, 2021, and a statement of cash flows for the year ended December 31, 2021 indirect and direct.

Jan 1 2021

• Issued $500,000 in bonds at par value. The bonds have a stated interest rate of 8%, payable semiannually on July l and January 1.

• The estimated useful life and salvage value for the building were changed. It is now estimated that the building has a remaining life (as of January 1, 2021) of 20 years. Also, it is now estimated that the building will have no salvage value. These changes in estimate are to take effect for the year 2021 and subsequent years.

Jan 15

• Paid the cash dividend declared in November 2020.

Feb 1

• McCadden Company repurchased 10,000 shares of its own common stock to be held as treasury stock. The price paid was $37 per share.

• Paid the interest on the loan from Burtone Bank.

April 10

• Sold all 40,000 shares of the Larry Company stock. The shares were sold for $28 per share.

Jul 1

• Paid the interest on the bonds.

Oct 1

• Retired the bonds that were issued on January 1. McCadden had to pay $470,000 to retire the bonds. This amount included interest that had accrued since July 1.

Nov 20

• Declared a cash dividend of $0.40 per share. The dividend applies only to outstanding shares, not to treasury shares.

Dec 31

• Made the lease payment.

• After recording depreciation expense for the year, the building was evaluated for possible impairment. The building is expected to generate cash flows of $20,000 per year for its 19- ycar remaining life. The building has a current market value of $325,000.

• The Frances Ann Company shares had a market value of $18 per share.

Summary

• Sales for the year (all on credit) totaled $1.7 million. The cost of inventory sold was $800,000.

• Cash collections on credit sales for the year were $1.43 million.

• Inventory costing $900,000 was purchased on account.

Payments on account totaled $880,000.