So the Question to be answered are:

a)Prepare a classified income statement for the year ended December 31, 2020, and a classified balance sheet as of December 31, 2020.

b)Prepare a trial balance as of December 31, 2020. There is no need to show your ledger T-accounts.

Comprehensive Problem McCadden Company started business on January 1, 2020. The following transactions and events occurred in 2020 and 2021. For simplicity, information for sales, inventory purchases, collections on account, and payments on account is given in summary form at the end of each year. 2020 Jan 1 Issued 100,000 shares of $1-par common stock to investors at $20 per share. Purchased a building for $550,000. The building has a 25-year expected useful life and a $50,000 expected salvage value. McCadden uses the straight-line method of depreciation. Leased equipment under a five-year lease. The five lease payments of $30,000 each are to be made on December 31 of each year. The cash price of the equipment is $113,724. This lease is accounted for as a capital lease with an implicit interest rate of 10%. The equipment has a five-year useful life and zero expected salvage value; McCadden uses straight-line depreciation with all of its equipment. Feb 1 Borrowed $1.5 million from Burtone Bank. The loan bears an 11% annual interest rate. Interest is to be paid each year on February 1. The principal on the loan willbe repaid in four years. March 1 Purchased 40,000 shares of Larry Company for $35 per share. McCadden classifies this as an investment in trading securities. These securities are reported as a current asset. July 15 Purchased 50,000 shares of Frances Ann Company for $21 per share. McCadden classifies this as an investment in available-for-sale securities. These securities are reported as a long-term asset. Nov 17 Declared a cash dividend of $0.25 per share, payable on January 15, 2021. Dec 31 Made the lease payment. The Larry Company shares had a market value of $30 per share. The Frances Ann Company shares had a market value of $27 per share. Summary a. Sales for the year (all on credit) totaled $800,000. The cost of inventory sold was $350,000. b. Cash collections on credit sales for the year were $370,000. c. Inventory costing $420,000 was purchased on account. (McCadden Company uses the perpetual inventory method.) d. Payments on account totaled $400,000. 2021 Jan 1 Issued $500,000 in bonds at par value. The bonds have a stated interest rate of 8%, payable semiannually on July 1 and January 1. The estimated useful life and salvage value for the building were changed. It is now estimated that the building has a remaining life (as of January 1, 2021) of 20 years. Also, it is now estimated that the building will have no salvage value. These changes in estimate are to take effect for the year 2021 and subsequent years. Jan 15 Paid the cash dividend declared in November 2020. Feb 1 McCadden Company repurchased 10,000 shares of its own common stock to be held as treasury stock. The price paid was $37 per share. Paid the interest on the loan from Burtone Bank. April 10 Sold all 40,000 shares of the Larry Company stock. The shares were sold for $28 per share. Paid the interest on the bonds. Oct 1 Retired the bonds that were issued on January 1. McCadden had to pay $470,000 to retire the bonds. This amount included interest that had accrued since July 1. Nov 20 Declared a cash dividend of $0.40 per share. The dividend applies only to outstanding shares, not to treasury shares. Dec 31 Made the lease payment. After recording depreciation expense for the year, the building was evaluated for possible impairment. The building is expected to generate cash flows of $20,000 per year for its 19. year remaining life. The building has a current market value of $325,000. The Frances Ann Company shares had a market value of $18 per share. Summary a. Sales for the year (all on credit) totaled $1.7 million. The cost of inventory sold was $800,000 b. Cash collections on credit sales for the year were $1.43 million. c. Inventory costing $900,000 was purchased on account. d. Payments on account totaled $880,000. Comprehensive Problem McCadden Company started business on January 1, 2020. The following transactions and events occurred in 2020 and 2021. For simplicity, information for sales, inventory purchases, collections on account, and payments on account is given in summary form at the end of each year. 2020 Jan 1 Issued 100,000 shares of $1-par common stock to investors at $20 per share. Purchased a building for $550,000. The building has a 25-year expected useful life and a $50,000 expected salvage value. McCadden uses the straight-line method of depreciation. Leased equipment under a five-year lease. The five lease payments of $30,000 each are to be made on December 31 of each year. The cash price of the equipment is $113,724. This lease is accounted for as a capital lease with an implicit interest rate of 10%. The equipment has a five-year useful life and zero expected salvage value; McCadden uses straight-line depreciation with all of its equipment. Feb 1 Borrowed $1.5 million from Burtone Bank. The loan bears an 11% annual interest rate. Interest is to be paid each year on February 1. The principal on the loan willbe repaid in four years. March 1 Purchased 40,000 shares of Larry Company for $35 per share. McCadden classifies this as an investment in trading securities. These securities are reported as a current asset. July 15 Purchased 50,000 shares of Frances Ann Company for $21 per share. McCadden classifies this as an investment in available-for-sale securities. These securities are reported as a long-term asset. Nov 17 Declared a cash dividend of $0.25 per share, payable on January 15, 2021. Dec 31 Made the lease payment. The Larry Company shares had a market value of $30 per share. The Frances Ann Company shares had a market value of $27 per share. Summary a. Sales for the year (all on credit) totaled $800,000. The cost of inventory sold was $350,000. b. Cash collections on credit sales for the year were $370,000. c. Inventory costing $420,000 was purchased on account. (McCadden Company uses the perpetual inventory method.) d. Payments on account totaled $400,000. 2021 Jan 1 Issued $500,000 in bonds at par value. The bonds have a stated interest rate of 8%, payable semiannually on July 1 and January 1. The estimated useful life and salvage value for the building were changed. It is now estimated that the building has a remaining life (as of January 1, 2021) of 20 years. Also, it is now estimated that the building will have no salvage value. These changes in estimate are to take effect for the year 2021 and subsequent years. Jan 15 Paid the cash dividend declared in November 2020. Feb 1 McCadden Company repurchased 10,000 shares of its own common stock to be held as treasury stock. The price paid was $37 per share. Paid the interest on the loan from Burtone Bank. April 10 Sold all 40,000 shares of the Larry Company stock. The shares were sold for $28 per share. Paid the interest on the bonds. Oct 1 Retired the bonds that were issued on January 1. McCadden had to pay $470,000 to retire the bonds. This amount included interest that had accrued since July 1. Nov 20 Declared a cash dividend of $0.40 per share. The dividend applies only to outstanding shares, not to treasury shares. Dec 31 Made the lease payment. After recording depreciation expense for the year, the building was evaluated for possible impairment. The building is expected to generate cash flows of $20,000 per year for its 19. year remaining life. The building has a current market value of $325,000. The Frances Ann Company shares had a market value of $18 per share. Summary a. Sales for the year (all on credit) totaled $1.7 million. The cost of inventory sold was $800,000 b. Cash collections on credit sales for the year were $1.43 million. c. Inventory costing $900,000 was purchased on account. d. Payments on account totaled $880,000