SD is a manufacturer of matresses and it was incorporated on January 2, 2022. The following transactions happened during the year ended December 31, 2021. On January 2, 2022, the owners Sleepy & Snoozy Dreams, each invested $300,000 in the company. 2 On January 2nd, Sweet Dreams signed a two-year lease contract to rent a building which will be used as the main manufacturing facility. The contract required Sweet Dreams to pre-pay the entire amount upfront on January 2, 2022. Monthly rent is $4,800 per month. 3 On March 1, Sweet Dreams purchased manufacturing equipment at a cost of $180,000. Sweet Dreams paid $80,000 in cash and the rest will be paid next year. The equipment has a useful life of 8 years and $5,000 residual value. The company uses straight line method of depreciation. 5 6 On April 1, Sweet Dreams borrowed $350,000 from a bank. The loan is a 4-year with 4% interest rate. The interest is payable on the first day of each month, beginning May 1st. On April 15, Sweet Dreams purchased inventory of $270,000 from suppliers on account. On May 1, Sweet Dreams received an order to manufacture 500 matresses for a college dorm. The customer paid $20,000 in advance. The matresses were delivered at the end of August, 2022. The cost of making the matresses was $8,000. The company uses a perpetual inventory system. Ignore HST for this sale.