balance sheet, income statement and cash flows, accounting homework help

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Business Finance

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Glacier Lakes Boating Company, Inc. Sam Carrothers and his brother, Arthur, were avid outdoors men and were also quite entrepreneurial. Thus, they agreed to go into business together selling fishing and recreational boats on a small lake near Glacier Park in Montana. Since the nearest competition was across the border in Lethbridge, Alberta, Canada, they were confident that their business, Glacier Lakes Boating Company (GLBC), would be successful. The soon located a site for their business -- a parcel of waterfront land containing a dock and an old, dilapidated building. At this point, they decided to form a corporation and hired an attorney to draft the articles of incorporation for GLBC. The brother’s split the attorney’s $1,800 bill evenly. On June 1, 2016, Sam purchased 1,800 shares for $72,000 and Arthur paid $24,000 for 600 shares. Because they each took credit for their half of the attorney’s invoice, GLBC only received $94,200. The brothers agreed that any future purchase, or sale, of shares would be done at the book value at the time of the purchase, or sale. They also agreed that they would earn a salary of $2,500 per month (paid monthly) for each month that they were fully engaged in conducting GLBC’s business. They knew that this was a lot less than they could earn in their former jobs, but were happy to pay the price as they started their own business. On July 1, 2016, Sam purchased the site that they had previously identified with the help of a $20,000 bank loan and $40,000 of the company’s money. That same day, Sam resigned from his full-time job so that he could devote his full attention to GLBC (and earn his $2,500 monthly salary). The first thing that Sam did was arrange to have the old, dilapidated building torn down as there was no value to it. ABC Wrecking Company tore down the building in July for $17,000 and agreed to defer payment until April 30, 2017. Meanwhile, Sam contacted RFB, Inc., a large manufacturer of recreational and fishing boats. In exchange for GLBC’s promise to sell only its boats, RFB agreed to provide all of the financing for GLBC’s new building on the site. The loan carried an annual interest rate of 12% (simple interest) with the first installment due on July 31, 2017. Interest was charged from the date of each advance by RFB. On August 1, 2016, RFB provided GLBC with a $40,000 check to get construction of the new building started. The balance of the loan would be provided upon completion of the building. Construction of the building began immediately under the supervision of a consulting architect, and the contractor promised completion by December 31, 2016 at a price of $140,000. As construction progressed, GLBC made payments to the contractor of $40,000 on August 1, $60,000 on October 31, and $40,000 at completion on December 31, 2016. RFB provided the financing for the October 31 and December 31 payments, as well as the initial $40,000 loan on August 1. During the construction period, Sam tried to obtain some orders for boats which would be delivered to the customers directly from RFB’s warehouse in Spokane, Washington. Between October 1 and December 31, 2016, Sam sold seventeen boats at an average cost to GLBC of $9,000 per boat. All of this was paid to RFB by December 31, 2016. These seventeen sales resulted in $187,000 of revenue, of which $18,000 was still outstanding as of December 31, 2016. Previously, the brothers agreed that Sam would receive a $40 commission per boat for his efforts in selling the boats, and GLBC paid Sam his commissions in December. Glacier Lakes Boating Company, Inc. The building was completed at the end of December. There were extra costs of $3,000 (for changes that GLBC had authorized) and the consulting architect’s $5,000 bill arrived. These amounts were due in thirty days. The $20,000 bank loan, plus interest of $1,800 was repaid on December 31. Where appropriate, fixed assets, if any, should be depreciated over a twenty-five year period (using the double-declining balance method to zero salvage value) and intangible assets, if any, should be amortized over a five-year period (straight-line to zero residual value). Arthur quit his job on December 31 and joined GLBC on a full-time basis. At this time Arthur requested a set of financial statements so that the brother’s could see where they stood at the end of December . Required: a. Using either T-accounts or a hand-drawn spreadsheet, prepare a transactions analysis for GLBC from its date of incorporation until December 31, 2016. b. Prepare a balance sheet, income statement and statement of cash flows (direct method) for the period ending December 31, 2016. c. Prepare a reconciliation of the cash provided by operations from the statement of cash flows to GLBC’s net income for the period. d. Based on your financial statements, what is the value of each brother’s equity in GLBC as of December 31, 2016?
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Explanation & Answer

Completed. see the attached file

a) GLBC COMPANY
TRANSACTIONS ACCOUNT
Transaction description
1/06/2016
attorney fee
cash
1/06/2016
Purchase of Shares(Sam)
Cash
Shares purchase (Arthur)
Cash
Cash
Attorney’s invoice
1/07/2016
Cash
Bank loan
bank account
cash
purchase site
cash
July 2016
(ABC wrecking CO.
Accounts payable
1/08/2016
Cash
Loan
Pay...


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I was having a hard time with this subject, and this was a great help.

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