1. Prepare the following for the December 31, 2013 year-end for Innova Technologies Ltd:

(a) adjusting entries for the year ending December 31, 2013. The unadjusted trial balance at December 31, 2013 is provided in Appendix 1. Prepare an adjusted trial balance (supported by T-accounts). Innova adjusts its accounts annually.

(b) a multiple-step income statement and a classified statement of financial position for Innova for 2013. Any assumptions you have made in order to prepare the statements should be clearly stated in your answer, and details of all your calculations should be included. 

Ignore the effects of GST, Provincial Sales Tax, and employee payroll deductions.

2. Prepare the following:

(a) a horizontal analysis of the income statements and of the statements of financial position showing the horizontal change for the period 2012-2013, in both dollar amounts and percentages.

(b) a vertical analysis of the income statements (using net sales as the base amount) and statements of financial position (using total assets as the base amount) for 2012 and 2013.

3. Prepare a ratio analysis for 2012 and 2013 that includes sufficient information to analyze the liquidity, solvency and profitability of Innova.

4. Based on your results from Question 3, what financial problems are faced by Innova in the areas of liquidity, solvency and profitability?

What are the causes? Should Innova be concerned about the possibility of bankruptcy? Elaborate on your position and provide recommendations about how to resolve some of the concerns.