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Prepare sets of financial statements

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Reference no: EM132418904

Assignment: ABC Inc. had two accountants named Ms. Lee and Mr. Wong who created two different sets of income statements, cash flow statements, and balance sheets to give to the Accounting Manager of ABC Inc. Ms. Lee believed that the FIFO method was the best way of costing inventory and believed that packaging the screwdrivers is integral to selling them. Mr. Wong believed that the weighted average method is best for inventory costing and that packaging is not really important to sell the screwdrivers. ABC Inc. made the following transactions:

  1. Jan 1st, 2019: ABC Inc. receives 1200 metal plates for which it pays cash of $5 each from Metal Inc. and receives 6000 plastic slabs from Plastic Inc. for which it pays $1 to the supplier in cash.
  2. Jan 21st, 2019: ABC Inc. receives 600 metal plates for which it pays cash of $6 each from Metal Inc. and receives 3000 plastic slabs from Plastic Inc. for which it pays $2 each to the supplier in cash.
  3. Jan 28th, 2019: ABC Inc. produces 25,000 screwdrivers and uses 1,300 metal plates and 7,500 plastic slabs to make those screwdrivers.
  4. Jan 30th, 2019: ABC Inc. spends $5,000 cash on packaging its 25,000 screwdrivers.
  5. Jan 31st, 2019:  ABC Inc. sells 18,000 screwdrivers to Wan Chai Inc. for $10 each. However, Wan Chai Inc. uses a Hong Kong Express credit card, which had fees of 3%, and ABC Inc. receives the money in cash immediately from Hong Kong Express.
Required:

Question 1: Prepare both sets of financial statements (Balance sheet, cash flow statement, and income statement) - by Ms. Lee and Mr. Wong. Journal entries give partial credit.

Question 2: Which set of financial statements (Ms. Lee or Mr. Wong's) show that ABC Inc. is able to pay investors back better? Why?

Reference no: EM132418904

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