ABC Incorporated manufactures and sells toys. The following was its balance sheet as on December 31st, 2011.
ASSETS LIABILITIES AND STOCKHOLDERS EQUITY
Cash $250,000 Accounts Payable $120,000 Accounts Receivable $300,000 Salaries Payable $80,000 Inventory $80,000 Dividends Payable $50,000 Property, Plant and Equipment (Less Accumulated Depreciation, 150,000) $630,000 Retained earnings $980,000 Intangible Assets $62,000 Common Stock 92,000 TOTAL 1,322,000 TOTAL 1,322,000 The following is the relevant information for the year ending 2012. The depreciation on property, plant and equipment for the year 2012 was $20,000 The company lent funds worth $120,000 on July 1st to a supplier. Interest is received on June 30th of every year. The rate of interest is 10%. ABC incurred expenditures of $25,000 on internally developing a patent. It purchased an additional patent at $30,000. Bought municipal bonds worth $60,000. Interest accrued on these bonds for 2012 (but not paid) was $3,000. Fair value of these bonds was $62,000 on Dec 31st 2012. ABC reports these bonds at fair value. During the year, the company sold toys for $180,000. The company received 80% cash and the rest remained on account. The cost of these toys sold was $50,000. Raised funds by issuing $100,000 5-year bonds at par on November 1st 2012 at 6 percent interest per year with interest to be paid on March 31st every year. On Dec 31st, 2012, these bonds were trading at $99,000. ABC elects to records these bonds at their fair value. Paid off Salaries payable of $50,000. By December 31st, 2012, the company had accrued additional outstanding salaries worth $40,000. Warranty costs expected this year are $20,000. Warranty costs actually incurred this year are $5,000. By end of the year, ABC determined that the remaining warranty costs would be incurred in future years. Paid off Accounts payable of $10,000 and dividends payable of $50,000. For this year, dividends declared (but not paid) were $60,000, which will be paid next year (i.e. in 2013). ABC discontinued its pre-school toys division. Property, plant and equipment (book value = $80,000) were sold for $60,000. Tax Rate is 20% Required: Create an income statement, statement of retained earnings, balance sheet and cash flow statement for the year ended December 31st 2012. Can you do a step by step solution on this problem as opposed to just a summary?