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 thenet ending balance for each accountfor the accounts listed below.

Month 1:

1.$2,000,000 sale of stock occurs with all cash received by the company

2.$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 interestcashpayments will be made in a lump-sum payment at the end of the loan period.

3.Factory is leased at the beginningof 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.

4.$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.

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

6.$800,000 of inventory is received and will be paid to the suppliers in 30 days.

Month 2:

1.$550,000 in sales are recorded on 30-day terms.The cost of the product sold is $500,000.

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

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

4.Additional inventory valued at $500,000 is made.The supplier requires a 50% down payment at the time of inventory receipt with the remaining 50% due within 30 days.

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

6.2^ndmonth of depreciation expense is recorded.

7.2^ndmonth of prepaid insurance expense is recorded.

8.2^ndmonth of prepaid lease expense is recorded.

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

Month 3:

1.$800,000 is sold to customers on 30-day terms.The cost of the product sold is $800,000.

2.3rd month of depreciation expense is recorded.

3.3rd month of prepaidinsurance expense is recorded.

4.3rd month of prepaid lease expense is recorded.

5.Payment for inventory purchased in month 2 is made.An additional $300,000 of inventory is purchased from the same supplier with the supplier requiring a 50% down payment at the time of inventory receipt and the remaining 50% due within 30 days.

6.An additional bad debt reserve of $25,000 is created/recorded since additional outstanding accounts receivables have been determined to no longer be collectible.

7.Payment for 90% of the receivables generated during month 2 is received.

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

Month 4:

1.4th month of depreciation expense is recorded.

2.4th month of prepaid insurance expense is recorded.

3.4th month of prepaid lease expense is recorded.

4.$600,000 is sold to customers.The cost of the product sold is $400,000.50% of the sales are paid for at time of delivery to customer with the remainder due within 30 days.

5.Payment for inventory purchased on terms in month 3 is made.An additional $200,000 of inventory is purchased from the same supplier with payment due within 30 days.

6.$25,000 of inventory has been discovered to be obsolete with no market value whatsoever.The entire amount is scrapped and written off during this month.

7.Payment for 5% of the receivables generated during month 2 and 90% of the receivables generated during month 3 is received.

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

9.A $20,000 dividend is paid during month 4 to shareholders.

Note:A T-account table is provided for you to use to answer this question in Blackboard.After working through the T-accounts, the net balances for each of the Balance Sheet accounts listed belowmust bepopulated/answered:

Cash

Net Receivables

Inventory

Prepaid Expenses

Property, Plant, & Equipment

Total Assets

Accounts Payable

Debt

Stockholders' Equity

Total Liabilities & Stockholders' Equity