Question

INCOME STATEMENT (IN MILL$): January 1, 2019 – December 31, 2019

Revenue = 400; Gross Profit Margin = 30%; Operating Expenses (before depreciation) = 20; Depreciation = 20; Interest = 10; Average Tax Rate =40%; Preferred Dividend = 5; Common Dividend= 7; # of shares outstanding=10 million; Per Share Price of Common Stock = $50.00

BALANCE SHEET (IN MILL$): December 31, 2019

Cash = 5; A/R = 20; Inventory = 55; Net Fixed Asset = 120; Accounts Payable= 10; Accrued Wages =5; Notes Payable = 5; Bonds (@5%) = 80; Preferred Stock = 10;

Common Equity: Common Stock ($1 par) = 10, Paid-in-Capital = 10, Retained Earnings = 70.

Prepare an income statement & a balance sheet based on the information above.

Answer 1

- Preparing Income Statement for year 2019:-

Particular	2019
Revenue	400
Cost of Goods Sold	(280)
Gross Profit @30%	120
Operating Expenses	(20)
Depreciation	(20)
EBIT	80
interest	(10)
Taxable Income	70
Taxation (40%)	(28)
Net income	42
Preferred dividend	5.00
Common Dividend	7.00
Additions to RE	30.00

- Preparing Balance Sheet for year 2019:-

Assets	2019
Cash	5.00
Accounts receivables	20.00
Inventory	55.00
Current Assets	80.00
Net Plant & equipment	120.00
Total Assets	200.00
Liabilities and Equity
Accounts payable	10.00
Accured Wages	5.00
Notes Payable	5.00
Current Liabilities	20.00
Bonds @5%	80.00
Preferred Stock	10.00
Common Stock	10.00
Paid-in-Capital	10.00
Retained earnings	70.00
Total Shareholder's Equity	100.00
Total Liabilities and Equity	200.00