Question 2: The KLM company started its operations in 2022.

Three years later, the balance sheet for December 31, 2024, showed the following account balances (there were no other accounts listed):

Accounts receivables 129, Loan made to the ABC company 35, Accumulated depreciation 50, Paid in capital 500, Accounts payable 161, Wages payable 4, PP&E 200, Retained earnings 304, Inventory 49, Prepaid rent 12, Cash (?).

During 2025 the following transactions occurred:

1. Collections from customers were $753.

2. A machine (PP&E) was purchased for $250, all in cash.

3. The total cost of goods sold during the year was $656.

4. Sales, all on credit, were $777.

5. Marketing expenses were $25; of this amount, $18 was paid in cash.

6. The CEO of KLM announced she would resign her position effective June 30, 2026.

7. KLM purchased $666 worth of inventory, on account.

8. The employees of KLM earned $48 as wages. Cash payments to employees were $42.

9. Payments on accounts payable were $777.

10. Depreciation expense was $30.

11. Rent in the amount of $30 was paid, in cash, during the year. The Prepaid rent account balance at the end of the year was $3.

12. The ABC company was supposed to pay KLM $5 as interest for 2025 on its loan; however, due to a strike in the postal service the payment had arrived on January 15, 2026.

13. A dividend of $48 was declared during 2025, but was not paid.

14. A long-term loan in the amount of $50 was taken from a local bank.

Required:

a. What was the balance of the Cash account on December 31, 2024?

b. Record journal entries for all transactions that occurred during 2025

c. Prepare an Income Statement for the year ended December 31, 2025.

d. Prepare a Balance Sheet for December 31, 2025.

e. Prepare a Statement of Cash Flows for the year ended December 31, 2025. Use the indirect approach.