Question

Consider the following income statement for the Heir Jordan Corporation:

  

HEIR JORDAN CORPORATION Income Statement
Sales					$	48,800
Costs						34,800
Taxable income					$	14,000
Taxes (30%)						4,200
Net income					$	9,800
Dividends	$	3,200
Addition to retained earnings		6,600

  

The balance sheet for the Heir Jordan Corporation follows. Based on this information and the income statement, supply the missing information using the percentage of sales approach. Assume that accounts payable vary with sales, whereas notes payable do not. (Leave no cells blank - be certain to enter "0" whenever the item is not a constant percentage of sales. Enter each answer as a percent rounded 2 decimal places, e.g., 32.16.)

  

HEIR JORDAN CORPORATION Balance Sheet

Percentage of Sales

Percentage of Sales

Assets

Liabilities and Owners’ Equity

Current assets

Current liabilities

Cash

$

2,650

_______

Accounts payable

$

2,400

______

Accounts receivable

3,600

_______

Notes payable

5,300

______

Inventory

9,000

_______

Total

$

15,250

_______

Total

$

7,700

_______

Long-term debt

$

24,000

_______

Owners’ equity

Common stock and paid-in surplus

$

18,000

_______

Retained earnings

3,950

_______

Fixed assets

Net plant and equipment

$

38,400

________

Total

$

21,950

_______

Total assets

$

53,650

________

Total liabilities and owners’ equity

$

53,650

_______

Answer 1

HEIR JORDAN CORPORATION
Balance Sheet
		Percentage of Sales = Item Value /Sales *100			Percentage of Sales = Item Value /Sales *100
Assets			Liabilities and Owners’ Equity
Current assets			Current liabilities
Cash	$2,650	5.43%	Accounts payable	$2,400	4.92%
Accounts receivable	$3,600	7.38%	Notes payable	$5,300	0
Inventory	$9,000	18.44%
Total	$15,250	31.25%	Total	$7,700	4.92%
			Long-term debt	$24,000	0
			Owners’ equity
			Common stock and paid-in surplus	$18,000	0
			Retained earnings	$3,950	0
Fixed assets
Net plant and equipment	$38,400	78.69%	Total	$21,950	0
Total assets	$53,650		Total liabilities and owners’ equity	$53,650
Notes Payable as given in question has no link with sales. Long-Term Debt and Common Stock depends upon firm financing startegies and do not directly vary with sales.Retained earnings is related with sales only when increase in sales is capable of increasing revenue and additional retention income to the firm.