ACC221

REQUIREMENT

Instructions: In answering this requirement, strictly follow the following:

1. Answers must be handwritten.
2. Use black ink pen only.
3. Use white bond paper of any size.

The Problem
Wendelove Company provided the following information for the preparation of financial statements for
2019:

Balances-January 1, 2019:

Cash 800,000
Accounts Receivable 240,000
Inventory 460,000
Prepaid Insurance 70,000
Land 1,000,000
Building 4,000,000
Accumulated Depreciation 1,400,000
Equipment 1,600,000
Accumulated Depreciation 480,000
Accounts Payable 340,000
Accrued Salaries Payable 40,000
Advances from customers 180,000
Share Capital 5,000,000
Retained Earnings 730,000

 Cash Receipts for 2019

Advances from customers 140,000
Cash sales and collections on accounts receivable 5,920,000
Sale of equipment on December 31, 2019 costing 100,000
on which 60,000 of depreciation had been accumulated 90,000

 Cash Disbursements for 2019

Insurance premium 160,000
Purchase of equipment on October 1 400,000
Cash purchases and payments on accounts payable 3,280,000
Salaries 780,000
Dividends paid 250,000
Other expenses 270,000

 Dividends of 5% were declared on June 30 and on December 31, 2019.

 All depreciable assets should be depreciated at 10% per year.
 Doubtful accounts are estimated to be 5% of year-end accounts receivable. The accounts
receivable totaled 400,000 on December 31, 2019.
 Additional data on December 31, 2019
Inventory 490,000
Prepaid Insurance 50,000
Advances from customers 100,000
Accrued salaries 60,000
Accounts payable 200,000

Required:
1. Prepare an income statement for 2019.
2. Prepare a statement of financial position as of December 31, 2019.
3. Prepare Cash Flow Statement under the Direct Method
4. Statement of changes in equity
5. Notes to Financial Statement
6. Show the indirect method of presenting operating activities