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.)