Subject 1 (25%) . ABC was founded on January 1, 2020, when the firm issued shares of common stock to various investors. During 2020 received a bank loan. Assume the following information concerning ABC for the year ending December 31, 2020: a. Cash receipt: From customers 180,000 From issuance of common stocks 50,000 From bank loan 50,000 b. Cash disbursements: Inventory purchase 150,000 Salaries 15,000 Rent 7,500 Utilities 2,500 Purchase of equipment 20,000 Insurance 1,500

a. The bank loan was received on 1 April, 2020. The agreement requires payment of interest and principal on 1 April 1, 2021. The annual interest rate is 8%.

b. Inventories on hand at the end of the year cost 50,000. c. The equipment was purchased on 1 April 1, 2020. The estimated useful life was 8 years while the anticipated salvage value was minimal.

d. Rent on building is 500 per month. On November 1, 2020, five months rent was paid in advance.

e. ABCs share capital amounts to 50,000.

f. Income tax rate is 8%. A fiscal periods tax is payable during the next fiscal period.

g. On December 31, 2020 the following amounts were owned: To suppliers of inventory 10,000 To the utility company 500 Required: Prepare a balance sheet on December 31, 2020

. Assume the following information regarding company INDMACH that manufactures industrial machinery (consider each case independently)

1. INDMACH is being sued for 1,000,000 by its customers for damage caused to them by INDMACHs products. The amount is regarded considerable, and INDMACH is not insured. The INDMACH has not disclosed the suit in its recent financial statements arguing that no settlement has been reached with its customers.

2. INDMACH purchased an equipment for 2,000,000 (a considerable amount). INDMACH recorded the purchase as an expense.

3. XT is the major shareholder of INDMACH. The company paid an amount of 2,000 for personal expenses of XT. The company recorded the amount as an expense.

4. INDMACH received an order of 1,000,000 (a material amount) from customer. INDMACH recorded the amount as a revenue the day received the order.

5. INDMACH has not prepared and has not published financial statements for over four years.

6. INDMACH purchased a piece of machinery at a price of 300,000. An independent evaluator estimated the market value of the machinery at the purchase date at 400,000. The company recorded the value of the machinery at the day of purchase in the amount of 400,000.

Required: Identify the accounting that was violated (if any) in each of the above situations. Explain your answer (word limit 500).