Use T$-$accounts to record the $4$ months$$ of transactions noted below for this new start$-$up company. Record all entries affecting the income statement into $$Equity$$ since there are no separate T$-$accounts set up for the individual income statement accounts. Once all transactions have been posted, populate the net ending balance for each account for the accounts listed below.

Ensure all answers are posted in the following format: $1,000,000$ In other words, do NOT include a $ sign in your answer and do include commas as noted in the example.

Do NOT include any decimal point or fractions. If you do not submit your answer in this format, even though you may have calculated the correct answer, the automated grading of this exam question may mark your response as being incorrect.

For purposes of this exercise, treat any interest due on debt as Debt.

For purposes of this exercise, treat any item impacting the income statement$/$profitability as Stockholders' Equity.

A T$-$account worksheet is provided in Blackboard to assist you as you answer this question.

Month $1$:

$$2,000,000$ sale of stock occurs with all cash received by the company.

$$3,000,000$ bank loan received from the company$$s bank at the end of the month $$ interest will start accruing next month $($interest rate is $1\%$per month$).$ Principal and interest cash payments will be made in a lump$-$sum payment at the end of the loan period.

Factory is leased at the beginning of the month and prepaid for the entire year up$-$front at a cost of $$720,000.$ The first month of lease expense is expensed to the income statement now.

$$2,400,000$ investment in factory equipment is made. Total purchase price is payable in $30$ days. Equipment will be depreciated on a straight line basis over $10$ years. First month of depreciation expense is recorded now.

Business insurance with coverage for the entire upcoming year is purchased at the beginning of the month at a cost of $$360,000.$ The policy is fully prepaid for at the time of purchase. The first month of insurance expense is charged to the income statement now.

$$800,000$ of inventory is purchased and received and will be paid to the suppliers in $30$ days.

Month $2$:

$$550,000$ in sales are recorded on $30-$day credit terms. The cost of the inventoried product sold is $$500,000.$

Payment for factory equipment purchased in month $1$ is made.

Payment for inventory purchased in month $1$ is made.

Additional inventory valued at $$500,000$ is purchased and received. The supplier requires a $50\%$ down payment at the time of inventory receipt $($in other words now$)$ with the remaining $50\%$ due within $30$ days.

A bad debt reserve of $$20,000$ is created$/$recorded since some of the amounts in accounts receivable no longer appear to be collectible.

$2$nd month of depreciation expense is recorded.

$2$nd month of prepaid insurance expense is recorded.

$2$nd month of prepaid lease expense is recorded.

The first month of interest expense related to the bank loan received during month $1$ is accrued.