Chapter 2: 1BP_a (page 145)
Shock Electronics sells portable heaters for \(35 per unit, and the variable cost to produce them is \)22. Mr. Amps estimates that the fixed costs are $97,500.
a. Compute the break-even point in units.
Break-even point of the company is 7,500 units.
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Classify the following balance sheet items as current or noncurrent:
Retained earning | Bond payable |
Accounts payable | Accrued wages payable |
Prepaid expenses | Accounts receivable |
Plant and equipment | Capital in excess of par |
Inventory | Preferred stock |
Common stock | Marketable security |
Using the income statement for Times Mirror and Glass Co., compute the following ratios:
b. The fixed charge coverage.
Times mirror and glass company | |
Sales | \(126,000 |
Less: Cost of goods sold | 93,000 |
Gross profit | \)33,000 |
Less: selling and administrative expenses | 11,000 |
Lease Expenses | 4,000 |
Operating profit* | \(18,000 |
Less: Interest expenses | 3,000 |
Earning before taxes | \)15,000 |
Less: Taxes (30%) | 4,500 |
Earning after taxes | $10,500 |
*equal income before interest and taxes
For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:
Current assets | Liabilities | ||
Cash | \(15,000 | Accounts payable | \)17,000 |
Accounts receivable | 20,000 | Notes payable | 25,000 |
Inventory | 30,000 | Bonds payable | 55,000 |
Prepaid expenses | 12,500 | ||
Fixed assets | Stockholder’s equity | ||
Plant and equipment (gross) Less: accumulated depreciation | \(255,000 51,000 | Preferred stock | \)25,000 |
Net plant and equipment | \(204,000 | Common stock | 60,000 |
Paid in capital | 30,000 | ||
Retained earnings | 69,500 | ||
Total assets | \)281,500 | Total liabilities and stockholder’s equity | \(281,500 |
Sales for 20X2 were \)245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was \(24,500. Depreciation expense was 8 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while the interest rate on the bonds payable was 12 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 20 percent.
\)2,500 in preferred stock dividends were paid, and \(5,500 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding.
During 20X2, the cash balance and prepaid expenses balances were
unchanged. Accounts receivable and inventory increased by 10 percent. A new machine was purchased on December 31, 20X2, at a cost of \)40,000. Accounts payable increased by 20 percent. Notes payable increased by \(6,500 and bonds payable decreased by \)12,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change.
b. Prepare a statement of retained earnings for 20X2.
Easter Egg and Poultry Company has \(2,000,000 in assets and \)1,400,000 of debt. It reports net income of $200,000.
b. What is its return on stockholders’ equity?
Elite Trailer Parks has an operating profit of \(200,000. Interest expense for the year was \)10,000; preferred dividends paid were \(18,750; and common dividends paid were \)30,000. The tax was $61,250. The firm has 20,000 shares of common stock outstanding.
a. Calculate the earnings per share and the common dividends per share for
Elite Trailer Parks.
b. What was the increase in retained earnings for the year?
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