Multi$-$step question $3$:

a$.$ Say that a company raises $$500$ to purchase inventory, and it finances the

purchase entirely with debt. Walk me through the three statements.

i$.$ IS:

ii$.$ SCF:

iii. BS:

b$.$ A year passes, and the company sells the $$500$ of Inventory for $$1200.$ However,

it also recorded a litigation expense of $$200.$ The company pays $10\%$ interest on

its debt and repays $50\%$ of the principal. What happens on the statements over the

course of the year?

i$.$ IS:

ii$.$ SCF:

iii. BS: