Sam Corporation operates under ideal conditions of certainty. It acquired its sole asset (a pen making machine) on January 1, 2018. The asset will yield $500 cash for 2 years at the end of year 2019 and 2020. Salvage value or disposal costs are expected to be zero. The interest rate in the economy is 6%. Purchase of the asset was financed by the issuance of common shares. Flamenco Corporation will pay no dividend at the end of each year.

Required

a. Prepare a balance sheet and income statement as at the end of December 31, 2019.