Question - Snickers Corp. Prepares its financial statements under U.S. GAAP
During the Year
- The company begins operations on January 1, 2016. The company is started by issuing 50,000 shares of common stock for $1,000,000 ($1 Par value stock)
- The company immediately purchases $400,000 in inventory for cash and sells $100,000 of this inventory to customer #1 for $150,000 on credit.
- The company purchases a machine for $120,000 cash on January 1st and depreciates it over 10 years (depreciation is recorded at year end and there is no salvage value)
- On June 1st, customer #1 pays us $70,000 of the amount due.
- During June $25,000 dollars of research and development expenses are incurred. $10,000 has not been paid as of yearend.
- One December 1st the company purchases and receives inventory (on Credit) 100,000 kroner worth of inventory when the spot rate is 3.00. To hedge this transaction the company enters into a forward contract to purchase 100,000 kroners 3/1/17 for 2.94. The 12/31/16 spot rate is 3.02. The forward rate at 12/31/16 (to purchase kroners at 3/1/17) is 2.99. The hedge is treated as a cash flow hedge. The discount factor is .9803
- As part of the year end closing process the value of the machine is determined to be $100,000 (based on the undiscounted cash flows). The net realizable value is $105,000.
Prepare a December 31, 2016 Balance Sheet and Income Statement.