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

Question

For December 31, 20X1, the balance sheet of Baxter Corporation was as follows: Current Assets Liabilities Cash $ 19,000 Accounts payable $ 21,000 Accounts receivable 24,000 Notes payable 29,000 Inventory 34,000 Bonds payable 59,000 Prepaid expenses 12,900 Fixed Assets Stockholders’ Equity Gross plant and equipment $ 259,000 Preferred stock $ 29,000 Less: Accumulated depreciation 51,800 Common stock 64,000 Paid in Capital 34,000 Net plant and equipment $ 207,200 Retained earnings 61,100 Total assets $ 297,100 Total liabilities and stockholders’ equity $ 297,100 Sales for 20X2 were $265,000, and the cost of goods sold was 55 percent of sales. Selling and administrative expense was $26,500. Depreciation expense was 12 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 8 percent, while the interest rate on the bonds payable was 16 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 40 percent. $2,900 in preferred stock dividends were paid, and $6,086 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 8 percent. A new machine was purchased on December 31, 20X2, at a cost of $44,000. Accounts payable increased by 20 percent. Notes payable increased by $6,900 and bonds payable decreased by $14,500, 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.)

Explanation / Answer

Baxter Corporation Income Statement (20X2)

Sales

$265000

Less: COGS

$145750

Gross Profit

$119250

Less: Selling and Administration Exps

$26500

Less: Depreciation 12% *259000

$31080

Earnings before interest and taxes

$61670

Less: Interest 8%*29000 + 16%*59000

$11760

Earnings before taxes

$49910

Less: Taxes 40%

$19964

Earnings after taxes

$29946

Less: Preferred stock dividends

$2900

Earnings for Common stockholders

$27046

EPS 27046/10000 shares

2.7046

Baxter Corporation Statement of Retained Earnings (20X2)

Particulars

Amount

Balance as on January 1, 20X1

$61100

Add; Earnings for Common stockholders

$27046

Less: Cash dividend

$6086

Balance as on December 31, 20X2

$82060

Baxter Corporation Balance Sheet (20X2)

Particulars

Amount

Particulars

Amount

Current assets

Current liabilities

Cash

$19000

Accounts payable

$25200

Accounts receivable

$25920

Notes payable

$35900

Inventory

$36720

Bonds payable

$44500

Prepaid expenses

$12900

Total current assets

$94540

Total current liabilities

$105600

Fixed Assets

Stockholders equity

Gross plant & Equipment

$303000

Preferred stock

$29000

Less: Accumulated depreciation

$82880

Common Stock

$64000

Net plant and equipment

$220120

Paid in capital

$34000

Retained earnings

$82060

Total Assets

$314660

Total Liabilities and equity

$314660

Sales

$265000

Less: COGS

$145750

Gross Profit

$119250

Less: Selling and Administration Exps

$26500

Less: Depreciation 12% *259000

$31080

Earnings before interest and taxes

$61670

Less: Interest 8%*29000 + 16%*59000

$11760

Earnings before taxes

$49910

Less: Taxes 40%

$19964

Earnings after taxes

$29946

Less: Preferred stock dividends

$2900

Earnings for Common stockholders

$27046

EPS 27046/10000 shares

2.7046

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.