Arrange the following items in proper balance sheet presentation:
Plant and equipment – original cost
Allowance for bad debts
Common stock, $1 par, 100,000 share outstanding
Preferred stock, $59 par, 1,000 share outstanding
Capital paid in excess of par (common stock)
Common stock, preferred, capital paid in excess of par, and retained earnings are considered the equity and shown as the shareholder funds. The accounts payable, bonds payable, and notes payable are treated as liability and classified as a current liability. The cash, account receivable, inventory, and marketable securities are treated as the current assets, and the plant and machinery are considered the fixed asset of the company.
Retained earnings refer to the portion of the net income of a company that is held and saved by an organization for future investment and further growth opportunities.
Equity and liabilities
Common stock ($100,000+$88,000)
Less: Depreciation $309,000
Less: allowance for bad debts $9,000
The balance sheet for Stud Clothiers is shown below. Sales for the year were $2,400,000, with 90 percent of sales sold on credit.
Balance sheet 20X1
Liabilities and Equity
Bonds payable (long term)
Plant and equipment
Paid in capital
Total LIbilities and Equity
Compute the following:
d. Assets turnover ratio.
For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:
Plant and equipment (gross)
Less: accumulated depreciation
Net plant and equipment
Paid in capital
Total liabilities and stockholder’s equity
Sales for 20X2 were $245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was $24,500. Depreciation expense was 8 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while the interest rate on the bonds payable was 12 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 20 percent.
$2,500 in preferred stock dividends were paid, and $5,500 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding.
During 20X2, the cash balance and prepaid expenses balances were
unchanged. Accounts receivable and inventory increased by 10 percent. A new machine was purchased on December 31, 20X2, at a cost of $40,000. Accounts payable increased by 20 percent. Notes payable increased by $6,500 and bonds payable decreased by $12,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change.
b. Prepare a statement of retained earnings for 20X2.
Dr. Zhivàgo Diagnostics Corp.’s income statement for 20X1 is as follows
|Cost of goods sold||1790000|
|Gross profits||$ 1000000|
|Selling and administrative expenses||302000|
|Operating profits||$ 698000|
|Income before tax||$ 643200|
|Income after tax||$ 450240|
b. Assume that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2?
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