The Unadjusted pre-closing 12/31/2020 account balances for the Mahoney Company are listed below:

Net Sales	$12,540,000
Net Purchases	9,000,000
Selling Expenses	424,000
Cash	487,000
Machines	6,019,000
Accumulated Depreciation, Machines	2,154,000
Accounts Payable	1,445,000
Retained Earnings	4,182,000
Allowance for Doubtful Accounts	60,000
Building	4,800,000
Accumulated Depreciation, Building	468,000
Common Stock	4,760,000
Accounts Receivable	2,877,000
Depreciation Expense, Machines	1,077,000
Inventory @ 1/1/2020	925,000

During your audit, you discover the following four items that have yet to be recorded:

1) No depreciation on the building has been recorded for 2020. Depreciation on the building is based on Double-Declining Balance. It was purchased on 1/1/18 and has an estimated useful life of 40 years. The estimated salvage value is $1,000,000.

2) Mahoney exhanged a machine for a similar machine on 12/31/2020. The origianl machine cost $3,429,000 and has a book value of $2,134,000. The new machine had a fair value of $1,823,000; Mahoney also received $511,000 in cash. The exchange lacked commercial substance.

3) Mahoney uses the Income Statement approach to record Bad Debts. Bad Debts in 2020 are estimate to be 4% of Sales.

4) Ending Inventory is to be estimated using the Gross Profit Method. The historic Gross Profit percentage is 20%.

Required

A) Record journal entries for items #1-3 above; show supporting computations. In addition, compute ending inventory per #4 above; show supporting computations. Assume adjusting/closing entries to adjust inventory, closing Purchases, and Record Cost of Goods Sold were properly made.

B) Draft the 2020 Condensed Income Statement and the 12/31/2020 Balance Sheet. Assume no Taxes. Do not include Earnings Per Share.