Problem 1: Preparing an Income Statement, Statement of Retained


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I need help with understanding 3 practice problems related to Financial Statements, T-Account Transactions and 10-K reports. I’ve attached the 3 problem document with requirements, LOWES 10-K report as well as financial statement and t-account templates. Assessment 1.pdf Problem 1: Preparing an Income Statement, Statement of Retained Earnings, and Balance Sheet At the end of its first year of operations (December 31, 2012), the Acme Company released the financial data shown in the chart below: Acme Company Financial Data Accounts Amount Cash. $25,000 Receivables from customers (no allowance for $20,300 doubtful accounts is needed). Inventory of merchandise. $81,000 Equipment owned, at cost of $60,700 net of A/depreciation of $20,000. $40,700 Accounts payable owed to supplies. $66,140 Salary payable for 2012 (to be paid on January $1,800 4, 2013). Total sales revenue. $126,000 Operating expenses, including the cost of the merchandise sold. $80,200 Income taxes expense at 30% of pretax income; all paid during 2012. ? Contributed capital 10,000 shares outstanding. $87,000 Dividends declared and paid during 2012. $20,000 Prepare the following financial statements for the Acme Company: 1. Summarized Income statement for the year 2012. 2. Statement of retained earnings for the year 2012. 3. Balance sheet at December 31, 2012. 4. Prepare Liquidity Ratios and explain what those ratios tell us. Problem 2: Using T-Accounts, Preparing the Balance Sheet, and Computing and Interpreting the Current Ratio Johnson Company has been operating for several years. At December 31, 2012, the accounting records reflected the following data, shown in the table below: Johnson Company Financial Data Account Amount Cash $9,000 Investments (short-term) $4,000 Accounts receivable $13,000 Inventory $22,000 Notes receivable (long-term) $1,000 Equipment $48,000 Factory building $90,000 Intangibles $3,000 Accounts payable $15,000 Accrued liabilities payable $2,000 Notes payable (short-term) $7,000 Long-term notes payable $46,000 Contributed capital $90,000 Retained earnings $30,000 During the year 2013, Johnson Company had the following summarized activities: 1. Purchased short-term investments for $10,000 cash. 2. Lent $8,000 to a supplier who signed a three-year note. 3. Purchased equipment that cost $28,000; paid $4,000 cash and signed a one-year note for the balance. 4. Hired a new president at the end of the year. The contract was for $110,000 per year plus options to purchase company stock at a set price based on company performance. 5. Issued an additional 1,000 shares of capital stock for $12,000 cash. 6. Borrowed $20,000 cash from a local bank, payable in three months. 7. Purchased a patent (an intangible asset) for $4,000 cash. 8. Built an addition to the factory for $45,000; paid $10,000 in cash and signed a three-year note for the balance. 9. Returned defective equipment to the manufacturer, receiving a cash refund of $1,000. Complete the following five items: 1. Create T-accounts for each of the accounts on a balance sheet and enter the balances at the end of 2012 as beginning balances for 2013. Prepare a trial balance for 12/31/12. 2. Record each of the events for 2013 in T-accounts and determine the ending balances. For each recording (posting), include the identifying letter (a through i). Prepare a trial balance for 12/31/12. 3. Explain why you did or did not record item d, the hiring of the president, in a T-account. 4. Prepare a balance sheet at December 31, 2013. Classify the balance sheet as appropriate (into current assets, fixed assets, and so on). 5. Compute the current ratio for 2013. Interpret this ratio as it applies to Johnson Company at December 31, 2013, as compared to December 31, 2012. Analyzes the impact of transactions on balance sheet accounts, using correct financial data and computations to determine the effect on cash flows. Problem 3: Locating Information on Published Financial State

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