In May 1921, the success of the "Laugh-O-Grams" led to the establishment of Laugh-O-Gram Studio, for which he hired more animators, including Fred Harman's brother Hugh, Rudolf Ising and Iwerks. The Laugh-O-Grams cartoons did not provide enough income to keep the company solvent, so Disney started production of Alice's Wonderland—based on Alice's Adventures in Wonderland—which combined live-action with animation; he cast Virginia Davis in the title role. The result, a 12-and-a-half-minute, one-reel film, was completed too late to save Laugh-O-Gram Studio, which went into bankruptcy in 1923.
On 5 May 1921, the reparation Commission established the London Schedule of Payments and a final reparation sum of 132 billion gold marks to be demanded of all the Central Powers. This was the public assessment of what the Central Powers combined could pay, and was also a compromise between Belgian, British, and French demands and assessments. Furthermore, the Commission recognized that the Central Powers could pay little and that the burden would fall upon Germany.
A general election for the Parliament of Southern Ireland was held on 13 May. Sinn Féin won 124 of the new parliament's 128 seats unopposed, but its elected members refused to take their seats.
The biggest single loss for the IRA, however, came in Dublin. On 25 May 1921, several hundred IRA men from the Dublin Brigade occupied and burned the Custom House (the center of local government in Ireland) in Dublin city center. Symbolically, this was intended to show that British rule in Ireland was untenable. However, from a military point of view, it was a heavy defeat in which five IRA men were killed and over eighty captured.