Here is the 1/1/12 balance sheet of ABC Corporation: Cash 3,500 Accts payable 2,950 Accts Rec 5,700 Accrued interest 156 Allowance for Doubtful accts (570) Notes payable 1,400 Inventory 5,805 Bonds payable-current 500 Prepaid Ins 1,800 Current liabilities 5,006 Current assets 16,235 Bonds payable-long-term 4,000 Equipment 6,500 Buildings 10,000 long-term liabilities 4,000 Accum depr (2,542) Total liabilities 9,006 Net P, P and E 13,958 common stock 2,500 Total assets 30,193 paid in capital 5,300 retained earnings 13,387 Total equity 21,187 total liabilities and equity 30,193 Additional data:
1. The equipment is made up of the following purchases: 5/1/10 $3,200 8/1/11 $3,300
2. The buildings were purchased on 7/1/11
3. Depreciation is recorded using straight line and a 25 year life for the buildings and double declining balance with a 5 year life for the equipment. No salvage is expected.
4. The beginning inventory is recorded using LIFO and is made up of as: 300 units @ 10.25 3,075 260 units @ 10.50 2,730
5. The allowance for doubtful accounts is calculated using 10% of accounts receivable.
6. The note payable is due on 10/31/12. It was issued on 8/31/11. It bears interest at 9% which is due on Feb 1, May 1, Aug 1 and Nov1
7. The prepaid insurance policy was issued on 10/1/11 and was a 12 month policy.
8. The bonds are 10 year bonds which were sold on 1/1/11 for 5,000, par was 5,000. They bear interest at 6% and interest is paid on Jan 1 and July 1. Principal is retired each July 1 (1/10 each year) During the year the following transactions transpired:
9. Sales were 1,000 units for 27,000, all credit, terms net 30
10. Cash collections on these sales were 20,250
11. Purchases of inventory on credit: 230 units @ 10.45 300 units @ 10.55 360 units @ 10.80
12. Salaries of 5,300 were paid in cash
13. On Sep 1, 2012 a 12 month insurance policy was purchased for 4,200 in cash
14. Payments to vendors on account were 5,500
15. 35 shares of common stock were sold for 675 cash
16. Dividends of 750 cash were paid
17. New equipment costing $5,000 was purchased on 9/1/12 for cash
18. The equipment purchased on 5/1/10 was sold for 1,300 cash on 8/1/12
19. Accounts receivable in the amount of 700 were written off during the year.
Required:
1. Prepare all journal entries and accruals necessary for the year 1/1/12 to 12/31/12
2. Prepare an income statement, statement of retained earnings and cash flow statement for the year ended December 31, 2012. Prepare a classified balance sheet at December 31, 2012 3. Compute as many of the ratios from the text as there is information to do so. Include any analysis/interpretation of these ratios also.