Report the following transactions using the integrated financial statements model for Fiber Matters, Inc. for the year 2023, its first year of operations.

a. Issued stock for cash, $10,000

b Paid $3,000 cash on November 1^st for advanced payment of three months rent (November, December and January).

c. Purchased supplies on account, $2,000.

d. Received $12,000 cash for services to be completed in the future.

e. Borrowed $10,000 from Madoff Savings and Loan on a 5-year promissory note (ignore interest expense for this problem.)

f. Purchased equipment for $10,000.

g Performed $6,000 of the services in transaction (d).

h. An inventory at year-end reveals that there is $1,300 of supplies remaining.

i. Regular weekly salaries are $10,000. Salaries are paid on Friday for the five-day week which ended the previous Friday. 12/31 is a Wednesday.

j. Recorded rent expense for year ended 12/31 (see transaction b)

k. Recorded depreciation expense of $8,000 for the equipment purchased in (f).

Problem 2 (20 points)

1. Refer to the facts and your answer to Problem 1. Prepare an income statement and statement of retained earnings for Fiber Matters for the year 2023.
2. Refer to the facts and your answer to Problem 1. Prepare a classified balance sheet Fiber Matters for the year 2023.
3. Calculate two liquidity ratios for Fiber Matters, Inc. Assume that the services to be completed for D in Problem 1 will be performed in the first quarter of 2024. Briefly describe your assessment of Fiber Matters liquidity based on the ratios. How might you locate appropriate benchmarks to compare these ratios?

Problem 3 (20 points)

Amelia Marks and Mark Keene are senior vice-presidents of the Mutual of Muncie Insurance Company. They are co-directors of the companys pension fund management division, with Marks having responsibility for fixed income securities (primarily bonds) and Keene being responsible for equity investments. A major new client, the Indiana Mayors Association, has requested that Mutual of Muncie present an investment seminar to the mayors of the represented cities. Answer the following questions to use as illustrations in the presentation.

1. What is the value of a 1-year, $1,000 par value bond with a 10% annual coupon if its required rate of return is 10%?
2. Refer to part a. What is the value of a similar 10-year bond?

c. What would be the value of the bond described in part (a) if, just after it had been issued, the expected inflation rate rose by three percentage points, causing investors to require a 13% return? Is the security now a discount bond or a premium bond?

d. Refer to part a. What would happen to the bonds value if inflation fell, and r_d declined to 7%? Would it now be a premium bond or a discount bond?