Prepare an income statement for the year ended december 31


Warner Company started business on January 1, 2011. The following transactions and events occurred in 2011 and 2012. For simplicity, information for sales, inventory purchases, collections on account, and payments on account is given in summary form at the end of each year.
2011
Jan. 1 Issued 150,000 shares of $1-par common stock to investors at $15 per share.
1 Purchased a building for $720,000. The building has a 25-year expected useful life and a $70,000 expected salvage value. Warner uses the straight-line method of depreciation.
1 Leased equipment under a 10-year lease. The five lease payments of $20,000 each are to be made on December
31 of each year. The cash price of the equipment is $134,202. This lease is accounted for as a capital lease with an implicit interest rate of 8%. The equipment has a 10-year useful life and zero expected salvage value; Warner uses straight-line depreciation with all of its equipment.
Feb. 1 Borrowed $1.8 million from Foley Bank. The loan bears a 9% annual interest rate. Interest is to be paid each year on February 1. The principal on the loan will be repaid in four years.
Mar. 1 Purchased 50,000 shares of Ryan Company for $30 per share. Warner classifies this as an investment in trading securities. These securities are reported as a current asset.
July 15 Purchased 55,000 shares of Anson Company for $23 per share. Warner classifies this as an investment in available-for-sale securities. These securities are reported as a long-term asset.
Nov. 17 Declared a cash dividend of $0.30 per share, payable on January 15, 2012.
Dec. 31 Made the lease payment.
31 The Ryan Company shares had a market value of $26 per share. The Anson Company shares had a market value of $28 per share.
Summary:
a. Sales for the year (all on credit) totaled $900,000. The cost of inventory sold was $480,000.
b. Cash collections on credit sales for the year were $420,000.
c. Inventory costing $540,000 was purchased on account. (Warner Company uses the perpetual inventory method.)
d. Payments on account totaled $500,000.
2012
Jan. 1 Issued $400,000 in bonds at par value. The bonds have a stated interest rate of 10%, payable semiannually on July 1 and January 1.
1 The estimated useful life and salvage value for the building were changed. It is now estimated that the building has a remaining life (as of January 1, 2012) of 20 years. Also, it is now estimated that the building will have no salvage value. These changes in estimate are to take effect for the year 2012 and subsequent years.
15 Paid the cash dividend declared in November 2011.
Feb. 1 Warner Company repurchased 15,000 shares of its own common stock to be held as treasury stock. The price paid was $32 per share.
1 Paid the interest on the loan from Foley Bank.
Apr. 10 Sold all 50,000 shares of the Ryan Company stock. The shares were sold for $25 per share.
July 1 Paid the interest on the bonds.
Oct. 1 Retired the bonds that were issued on January 1. Warner had to pay $380,000 to retire the bonds. This amount included interest that had accrued since July 1.
Nov. 20 Declared a cash dividend of $0.30 per share. The dividend applies only to outstanding shares, not to treasury shares.
Dec. 31 Made the lease payment.
31 After recording depreciation expense for the year, the building was evaluated for possible impairment. The building is expected to generate cash flows of $18,000 per year for its 19-year remaining life. The building has a current market value of $320,000.
31 The Anson Company shares had a market value of $19 per share.
Summary:
a. Sales for the year (all on credit) totaled $1.8 million. The cost of inventory sold was $950,000.
b. Cash collections on credit sales for the year were $1.54 million.
c. Inventory costing $1,000,000 was purchased on account.
d. Payments on account totaled $970,000.

Required:

1. Prepare all journal entries to record the information for 2011. Also, prepare any necessary adjusting entries.

2. Prepare a trial balance as of December 31, 2011. There is no need to show your ledger T-accounts; however, preparing and posting to T-accounts may aid in the preparation of the trial balance.

3. Prepare an income statement for the year ended December 31, 2011, and a balance sheet as of December 31, 2011.

4. Prepare all journal entries to record the information for 2012. Also prepare any necessary adjusting entries.

5. Prepare a trial balance as of December 31, 2012. (As you compute the amounts to include in the trial balance, don't forget the beginning balances left over from 2011.)

6. Prepare an income statement for the year ended December 31, 2012, and a balance sheet as of December 31, 2012.

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Financial Accounting: Prepare an income statement for the year ended december 31
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