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Preparation of Financial Statements for Libby Sales Company

Question

Prepare Financial statements for Libby Sales Company for the year ended 31-December-2012 using the following given data.

 

Transactions during 2012 follow:

a) Borrowed $12m cash on a five-year, 10 percent note payable, dated March 1, 2012.

b) Contract signed 4/1/2012 to construct building for $12m beginning 6/1/2012

c) Sold 4m additional shares of capital stock for cash at $1 market value per share on 1/1/2012.

d) Earned $158m in revenues for 2012, including $52m on credit and the rest in cash.

e) Incurred $40m in Remaining Expenses for 2012, ($5m on credit and the rest paid in cash).

f) Collected accounts receivable, $34m. ($30m within 2/10 discount term)

g) Purchased office equipment, $13m cash on 7/1/2012.

h) Paid accounts payable, $19m.

i) Purchased supplies on account for future use, $23m.

j) Signed a three-year $33m service contract to start February 1, 2013.

k) Declared and paid cash dividends, $22m.

I) Sold excess undeveloped land for $200k, originally purchased at $150k

m) Purchases of inventory during the year of $50m with cash.

n) Purchased 100k shares 12/31/2012 for incentive plan next year at $1.25 market value per share

o) Interest paid 12/31/2012 on long term notes payable balance of $33m at 10%

p) Customers returned $8m of sales (50% were sales still on account, ie. In Accounts receivable)

q) Bank fees deducted by bank of $300k

Data for adjusting entries:

AJE1 Supplies counted on December 31, 2012, $5m.

AJE2 Interest accrued on new $12m note payable above.

AJE3 Wages earned by employees since the December 24 payroll but not yet paid, $0.6m.

AJE4 Income tax expense, $5m, payable in 2013.

AJE5 Prepaid insurance used (12 mos of 24 used)

AJE6 SL depreciation used for autos, life 5 years, 3 years remain, $0 salvage value.

AJE7 SL depreciation on equipment, life 7 years, $0 salvage value. (Equipment at 1/1/12 has 5 yrs remaining)

AJE8 At year end the Company estimates allowance for bad debts to be $5m.

AJE9 Inventory counted on December 31, 2012, $19m.

AJE10 Market value of ending inventory is estimated at $18m.

AJE11 Expected to lose product liability law suit amount undeterminable

Summary

This question belongs to finance and discusses about preparation of financial statements of a company based on the given data.

Total word count: Excel

 

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