Question

ABC Inc. is a restaurant that serves sandwiches and made the following transactions:

1. ABC Inc. Issues $55,000 worth of common stock to investors and receives cash

2. ABC Inc. uses cash to buy a $10,000 restaurant space to prepare food (consider this as property).

3. ABC Inc. uses cash to buy $20,000 worth of machines (or equipment) for preparing sandwiches.

4. ABC Inc. receives $15,000 of materials (or supplies) from a supplier for making sandwiches

   (chicken, bread, etc.) and says that it will pay within 6 months.

5. ABC Inc. hires 3 people to make the sandwiches who it pays $1,500 each

6. ABC Inc. uses only $12,000 of the $15,000 in materials to make the sandwiches (Hint:

   supplies/materials get converted to Inventory here)

7. ABC Inc. sells all the sandwiches in inventory for $30,000. Out of the $30,000$15,000 in

   Cash and $15,000 will be paid after 2 months.

8. ABC Inc. receives $15,000 in materials from a supplier who it pays in cash.

9. ABC Inc. finds out from a research study that its brand value is $10,000.

10. ABC Inc. acquires Clearwater Inc. for $30,000 by cash. Clearwater Inc. is a restaurant that had

    land worth $15,000 and had no other assets but had a very good brand name. People liked and

    trusted the name of Clearwater Inc.

11. ABC Inc. uses $10,000 of the materials to make sandwiches.

12. ABC Inc. sells 80% of the sandwiches in its inventory for $25,000 to a customer. She paid

    $20,000 in cash and will pay the remaining $5,000 within 1 month. (note that 80% means that 80%

    of the dollar amount of inventory is sold)

13. ABC Inc. records depreciation expense of $7,000 on equipment from (c) and $3,000 on the property from (b) but does not record depreciation on LAND.

14. ABC Inc. pays $6,000 to its staff for administration and accounting expenses (consider them as wages).

Please do the journal entries, Balance Sheet, Income statement, and Cash flow statement.

And also calculate the:

1.Return on Equity

2.Current ration

3.Debt-to-Equity Ratio

4.Quality of Income

Answer 1