Step 1

In 2012, XYZ Inc., a medical equipment distributor, sold 10,000 units of its hospital beds at an average price of $500 per unit. The company reported estimated returns and allowances of $200,000. The company purchased 11,000 units of its product from its manufacturer in 2012 at an average cost of $350 per unit. XYZ began 2012 with 1,000 units of its product in inventory (carried at an average cost of $300 per unit). Operating expenses (excluding depreciation) in 2012 were $400,000, and the depreciation expense was $100,000. XYZ had $2,000,000 in debt outstanding throughout all of 2012, which carried an average interest rate of 10%. The companys tax rate is 40%. Its fiscal year runs from January 1 through December 31. Given this information, prepare the following documents:

XYZs 2012 income statement

XYZs 2012 ending inventory balance (both in unit and in dollar terms)

Step 2

Transfer the net income from the income statement in Task 1 to retained earnings, and create a balance sheet in the given format with the following additional information for the year ending December 31, 2012. Particulars Amount ($) Accounts payable 39,000 Accrued expenses 18,000 Accumulated depreciation (65,000) Additional paid-in capital 164,000 Allowance for doubtful accounts (5,000) Cash 25,000 Common stock ($0.20 par) 45,000 Current portion of long-term debt 6,000 Gross accounts receivable 45,000 Gross fixed assets 500,000 Inventories 50,000 Prepaid expenses 384,000 Long-term debt 200,000 Net accounts receivable 40,000 Net fixed assets 435,000 Retained earnings 60,000 Short-term bank loan (notes payable) 18,000