Lurch Company's December 31, 2012, balance sheet follows: During 2013, the following transactions occurred: 1. To avoid

Question:

Lurch Company's December 31, 2012, balance sheet follows:

During 2013, 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, 2013, 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, 2013. 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, 2014. Construction costs (paid in cash) that occurred evenly throughout the year totaled $700,000. The building was completed on December 30, 2013, and the move-in to the new building was to occur during the next week.
2. On January 2, 2013, 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 5 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, 2013, 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, 2013, and a balance sheet as of December 31, 2013. Show all supporting journal entries and computations made during 2013. (Contributed by Scott I. Jerris)

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