The Lurch Company's December 31, 2009 balance sheet follows:
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During 2010, the following transactions occurred:
1. To avoid paying monthly rent of $5,000 on existing plant facilities, the company decided to buy a tract of land and construct a building of its own on it. On January 2, 2010, Lurch exchanged 6,000 shares of its common stock to acquire the land; the stock was selling for $25 per share. Construction of the building also began on January 2, 2010. At the time, Lurch borrowed funds by issuing a one-year, $500,000 note at 12% to help finance the project. The principal and interest on the note are due January 3, 2011. Construction costs (paid in cash) that occurred evenly throughout the year totaled $700,000. The building was completed on December 30, 2010, and the move in to the new building was to occur during the next week.
2. On January 2, 2010, Lurch exchanged its one existing machine plus $50,000 for a newer machine with a fair value of $430,000. The new machine is to be depreciated using straight line depreciation based on an economic life of five years and a residual value of $55,000.
3. Lurch uses a FIFO perpetual inventory system. Lurch sold $350,000 of its inventory for $700,000 cash, paid for its beginning accounts payable, and purchased $480,000 of inventory on account during the year.
4. On July 31, 2010, Lurch declared and paid a $2.50 per share cash dividend to its shareholders.
5. Lurch is subject to a 30% income tax rate, and income taxes are accrued at year-end.
Required:Prepare Lurch's income statement and statement of retained earnings for the fiscal year ended December 31, 2010, and a balance sheet as of December 31, 2010. Show all supporting journal entries and computations made during 2010. (Contributed by Scott I.Jerris)