Question

In: Accounting

For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:    Current Assets...

For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:
  

Current Assets

Liabilities

Cash

$

30,000

Accounts payable

$

32,000

Accounts receivable

35,000

Notes payable

40,000

Inventory

45,000

Bonds payable

70,000

Prepaid expenses

14,000

Fixed Assets

Stockholders’ Equity
Gross plant and equipment

$

270,000

Preferred stock

$

40,000

Less: Accumulated depreciation 54,000 Common stock

75,000

Paid in Capital

45,000

Net plant and equipment

$

216,000

Retained earnings

38,000

Total assets

$

340,000

Total liabilities and stockholders’ equity

$

340,000


Sales for 20X2 were $320,000, and the cost of goods sold was 50 percent of sales. Selling and administrative expense was $32,000. 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 40 percent.

$4,000 in preferred stock dividends were paid, and $7,000 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 $55,000.

Accounts payable increased by 25 percent. Notes payable increased by $8,000 and bonds payable decreased by $20,000, both at the end of the year. The preferred stock, common stock, and capital paid in excess of par accounts did not change.
  
a. Prepare an income statement for 20X2. (Round EPS answer to 2 decimal places.)

b. Prepare a statement of retained earnings for 20X2.

c. Prepare a balance sheet as of December 31, 20X2. (Amounts to be deducted should be indicated with parentheses or a minus sign.)
  

Solutions

Expert Solution

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