Homework Problems

Problem #1

For December 31,2012, the balance sheet of Baxter Corporation is as follows:

Current Assets Liabilities

Cash $10,000 Accts. Payable $12,000 Accts Receivable 15,000 Notes Payable 20,000 Inventory 25,000 Bonds Payable 50,000 Prepaid Expenses 12,000

Fixed Assets Stockholders Equity

Plant & Equip(gross) $250,000 Common Stock $75,000 Less Accum Deprec. 50,000 Paid in capital 25,000 Net Plant & Equip $200,000 Retained Earnings 80,000

Total Assets $262,000 $262,000

Sales for 2013 were $220,000 and the cost of goods sold was 60% of sales. Selling and administration expense was $22,000. Depreciation expense was 8% of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10%, and interest expense on the bonds payable was 12 percent. These interest expenses are based on Dec. 31, 2012 balances. The tax rate is 20%. Two thousand dollars in preferred stock dividends were paid and $8,400 in dividends was paid to common stock holders. There were 10,000 shares of stock outstanding.

During 2013, the cash balance and prepaid expenses balance were unchanged. Accounts receivable and inventory increased by 10%. A new machine was purchased on December 31, 2013, at a cost of $35,000. Accounts payable increased by 25%. Notes payable increased by $6,000 and bonds payable decreased by $10,000, both at the end of the year. The common stock and paid in capital in excess of par did not change.

(a) Prepare an income statement for 2013.

(b) Prepare a statement of retained earnings for 2013.

(c) Prepare a balance sheet as of December 31, 2013

Problem #2

Prepare a statement of cash flows for the Maris Corporation.

MARIS CORPORATION
Income Statement
Year Ending December 31, 2013

Sales $3,300,000