Q.1. A ) ALEX's BAXTER Corporation (ABC) is in its first year of operations. Using the information below, make a year-end income statement and balance sheet for the business (Remember to increase/reduce equity by the amount of income/loss).

1. Through 2020, ABC purchased 5,000 bandanas at an average cost of $2 per bandana. ALEX marked-up her bandanas to 2.5 times purchase price and sold all items in the same year. On December 31st, Alex had $5,950 cash in her corporate bank account and no remaining inventory, so she ordered 2,000 bandanas at a cost of $2.10 each (they were delivered to her the same day and she paid cash).

2. Alex is paid a monthly salary of $1,000 from ABC. Also, she rents a sales booth on weekends, so she can sell bandanas in person (in addition to online). The booth costs her $500 per month.

3. At the start of the year, Alex invested $5,000 into her business (100 common shares). She also obtained a bank loan of $5,000 (ABC has only paid an annual interest of 5%). Other than the bank loan and a $4,200 accounts payable balance, ABC holds no debts.

4. At the start of the year, Alex purchased furniture for $3,000 (expected life of 15 years with no salvage value) and sewing equipment for $2,000 (expected life of 10 years with no salvage value). Both assets are depreciated using the straight-line method.

B. In 2021, Alex plans to double her salary and spend $2,500 on marketing. She projects her cost to rise to $2.25 per bandana, but she expects to sell twice as many units as last year, at a price of $6 apiece. Assuming the other expenses remain constant, what does ABC's second year look like?

Mention In a short essay on what Alex should expect and give her appropriate business advice (You may use the projections below as part of your analysis).

Ratio December 31, 2021 projection

Current ratio 1.50

Debt-to-Assets 0.60