The following list summarizes the transactions that took place during a start ups third year of operations. Using the information below (and assuming FIFO for inventory), prepare a list of the appropriate journal entries, including any necessary adjusting entries, and create a full set of financial statements (including statements of cash flows and changes in equity). Once you have created the financial statements, provide the appropriate closing entries. Recall that there were 80 units of inventory left at the end of Year 2. Calculate what the LIFO adjustment would be at the end of Year 3. Also, calculate EPS for Year 3. Remember: 500 shares were originally issued at the start of Year 1.

Transactions and information for the year:

a) At the start of the year, the company issues a 10-year coupon bond with a face value of $300 and a stated rate of 8%. Payments are due on Dec 31. The market rate at the time of issuance was 6%. The company then repurchased 25 shares of common stock for $75

b) Collect $1000 of accounts receivable.

c) The company is notified of a lawsuit filed related to the R&D business acquired last year. A competitor is arguing that the use of one of the patents for commercial purposes violates a non- compete agreement that was signed when the R&D business originally purchased the patent for research purposes only. In the suit, the competitor is asking that the patent no longer be used for commercial purposes and is seeking $150 of compensation. The companys legal teambelieves it is reasonably possible the lawsuit will be lost and believes that damages could be anywhere between $0 and $150

d) Cash purchase of 150 units of inventory for $12 each

e) Delivered and billed for 30 units of order backlog from year 2 (ordered at $17/unit).

f) Ordered and received 100 units of inventory purchased on account for $14 each

g) A customer paid cash for 250 units of inventory at $16 each. 220 units were delivered.

h) In June, the legal team noted that it is now probable that the patent lawsuit will be lost. It continues to believe that the judgment could range between $0 and $150.

i) Incurred $700 of wages expense

j) Collected $500 of accounts receivable

k) Paid $600 of wages payable, $2100 of accounts payable, and $400 of taxes payable

l) In November, the company asked the legal team to offer $50 to settle the lawsuit. The offer was

rejected.