Reference no: EM132862906
Problem - At the end of last January, a manufacturing company had $45 954 in the bank. It owed the bank $224 000 because of the mortgage. It also had a working capital loan of $30 000. Its customers owed $22 943 and it owed its suppliers $12 992. The company owned property worth $250 000. It had $123 000 in finished goods, $102 000 in raw materials, and $40 000 in work in progress. Its production equipment was worth $450 000 when new, partially paid for by a $258 996 government loan due to be paid back in three years, but had accumulated a total of $240 000 in depreciation-$34 000 worth last January.
The company has investors who put up $100 000 for their ownership. It has been reasonably pro?table; this month the gross income from sales was $220 000, and the cost of the sales was only $40 000. Expenses were also relatively low; salaries were $45 000 last month, while the other expenses were depreciation, maintenance at $1500, advertising at $3400, and insurance at $300. The company pays taxes ate 55 percent and has unpaid taxes of $32 909.
a) Construct a balance sheet as of the end of January 2021.
b) Construct an income statement for January 2021.
c) What is the equity ratio of the company?
d) Given the value of the equity ratio, should the company release some of its retained earnings through dividends at this time?