The Davidson Corporation\'s balance sheet and income statement are provided here

Question

The Davidson Corporation's balance sheet and income statement are provided here.

Davidson Corporation: Balance Sheet as of December 31, 2014 (Millions of Dollars)

Davidson Corporation: Income Statement for Year Ending December 31, 2014 (Millions of Dollars)

Enter your answers for parts b-d in millions. For example, an answer of $25,000,000 should be entered as 25.

Construct the statement of stockholders' equity for December 31, 2014. No common stock was issued during 2014. Write out all your answers completely. For example, 25 million should be entered as 25,000,000. Round your answers to the nearest share or dollar.

How much money has been reinvested in the firm over the years? Round your answer to the nearest hundredth of million, if necessary.

$ _____ million

At the present time, how large a check could be written without it bouncing? Round your answer to the nearest hundredth of million, if necessary.

$ ____ million

How much money must be paid to current creditors within the next year? Round your answer to the nearest hundredth of million, if necessary.

$ ________ million

Assets Liabilities and Equity Cash and equivalents $10    Accounts payable $100 Accounts receivable 605    Notes payable 220 Inventories 910    Accruals 270   Total current assets $1,525      Total current liabilities $590 Net plant and equipment 2,325    Long-term bonds 1,510      Total debt $2,100    Common stock (100 million shares) 250    Retained earnings 1,500      Common equity $1,750 Total assets $3,850    Total liabilities and equity $3,850

Explanation / Answer

a.

Calculations and explanations:

Retained earnings for 2014 = retained earnings for 2013+net income for 2014 - cash dividends paid in 2014

Thus 1500 = retained earnings for 2013+1272.9 - 808.2915

or retained earnings at the end of 2013 = 1035.3915 million.

b. The amount of money reinvested = retained earnings at the end of 2014 = $1500 million.

c. Amount of check = amount of cash and equivalents = $10 million.

d. Amount to be paid to current creditors = accounts payable+notes payable = 100+220 = $320 million

(Note accruals are generally towards expenses unpaid and hence has not been included in the creditors). If the accruals are towards creditors then amount to be paid to current creditors = 100+220+270 = $590 million

Common stock Retained earnings Total stockholder's equity Shares Amount Balance, 12/31/13 100,000,000.00 $250,000,000.00 $1,035,391,500.00 $1,285,391,500.00 2014 Net income $1,272,900,000.00 less: cash dividends $808,291,500.00 Additions to RE $464,608,500.00 Balance, 12/31/14 100,000,000.00 $250,000,000.00 $1,500,000,000.00 $1,750,000,000.00

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