a. Prepare a Statement of Cashflow, for the year ended 31 December 2020.
b. Calculate the following ratio for the year 2020: (i). Quick Ratio, (ii). Accounts receivables Turnover, (iii). Profit Margin, (iv). Return on Common Stockholder’s Equity, (v). Debt to Asset Ratio. (1 mark for formula 1 mark for calculation)
c. Calculate the amount of gain or loss ABC Company made after the disposal of the plant asset. Write the appropriate journal entry.

ABC COMPANY

Income Statement

For the Year Ended December 31, 2020
Sales $503,000
Less:
Cost of goods sold $295,000
Operating expenses (excluding depreciation) 63,000
Depreciation expense 22,500
Income taxes 45,000
Interest expense 32,800
____________________
Net income $ 44,700

Comparative Balance sheet of ABC Company are given below :

ABC COMPANY
Comparative Balance Sheet
December 31

__2020 2019 _

Current Assets
Cash $58,200 $ 35,000
Accounts receivable 75,000 53,000
Inventories 120,000 132,000
Prepaid Rent 21,000 25,000
Prepaid Insurance 98,000 75,000
Non-Current Assets
Plant assets 325,000 250,000
Accumulated depreciation (62,200) (60,000)
Total Assets $635,000 $510,000

Current Liabilities
Accounts payable $98,000 $ 75,000
Notes payable 21,000 24,000
Long-term Liabilities:
Bank Loan 120,000 170,000
Stockholder’s Equity:
Common stock 285,000 170,000
Retained earnings 111,000 71,000
Total Stockholder’s Equity $393,000 $251,000

Total Liabilities and Stockholder’s Equity $635,000 $510,000

Additional information:
1. The current market price of one share/ stock of ABC Corporation is $13.88.
2. On 31 August 2020, a plant asset that was purchased three years back for $32,000 was sold for
$12,000. On 31 August 2020, the accumulated depreciation for the old plant asset was $10,000.
3. Common stock worth $115,000 was issued, due to which the company received $105,000 in cash.
4. New plant assets costing $107,000 were purchased for cash in 2020.
5. A portion of the bank loan was repaid in 2020.
6. A cash dividend of $15,000 was declared and paid during the year.

Answer rating: 100% (QA)

Statement of Cash Flow for ABC Co S No Particulars Amountin Amountin A Cash flow from Operating Activities Net Income 44700 Add Income Tax 45000 Profi... View the full answer