Problem One -- Financial Statement Preparation (45 points) Davis Company began December 2020 with the following balance sheet: Davis Company Balance Sheet As of November 30, 2020 Assets Liabilities and Owners' Equity Cash $ 3,090 Accounts payable $10,700 Accounts receivable 9,800 Inventory 7,750 Supplies 1,400 Common stock 20,000 Land 9,000 Building and equipment (net) 37,800 Retained earnings 38,140 Assets: $68,840 Liabilities and Owners' Equity: $68,840 During December, Davis entered into the following transactions: 1. Made $15,000 of sales: $10,000 for cash and the balance on credit. 2. The cost of goods sold was 30% of the sales price. 3. Purchased $3,650 of inventory: $1,250 for cash and $2,400 on credit. 4. Collected $5,900 of accounts receivable. 5. Sold land for $7,800; the land originally cost $5,000. 6. Returned $360 of defective inventory to supplier for credit to the Davis Company's account. 7. Paid $4,100 of accounts payable. 8. Purchased land on December 15th for $6,000 with a $1,000 down payment and a 12%, 2-year note for the balance. Interest and principal are due at the note's maturity. 9. Paid $2,400 of salaries in cash. Extra information: a. Accrued salaries at year-end total $800. b. The building and equipment are being depreciated using the straight-line method over an estimated life of 20 years with no residual value (they were two-year's old as of November 30, 2020). c. Supplies on hand at the end of the year total $630; d. The income tax rate is 30%. Required: (The T-accounts on the last page of the exam might be helpful) Prepare a December 2020 income statement and a balance sheet for the year then ended