Prepare an income statement for 2010

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Reference no: EM13327213

Problem 1

The Rockford Corporation has assets of $418,000, current liabilities of $126,000, and long-term liabilities of $131,000. There is $38,700 in preferred stock outstanding; 20,000 shares of common stock have been issued.

(a) Compute book value (net worth) per share.

Book value per share $


(b) If there is $32,300 in earnings available to common stockholders and Rockford's stock has a P/E of 21 times earnings per share, what is the current price of the stock?

Current price $

(c) What is the ratio of market value per share to book value per share?

Ratio

Problem 2

Amigo Software, Inc., has total assets of $820,000, current liabilities of $181,000, and long-term liabilities of $210,000. There is $90,000 in preferred stock outstanding. Thirty thousand shares of common stock have been issued.

(a) Compute book value (net worth) per share.

Book value per share $

(b) If there is $52,800 in earnings available to common stockholders and the firm's stock has a P/E of 26 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "tiny_mce_markerquot; sign in your response.)

Current price $

(c) What is the ratio of market value per share to book value per share?

Ratio

Problem 3

On December 31, 2009, the balance sheet of Baxter Corporation was as follows:

 

 

 

 

 

 

Current Assets

 

 

Liabilities

 

 

  Cash

$

13,000 

  Accounts payable

$

15,000  

  Accounts receivable

 

18,000 

  Notes payable

 

23,000  

  Inventory

 

28,000 

  Bonds payable

 

53,000  

  Prepaid expenses

 

12,300 

 

 

 

Fixed Assets

 

 

Stockholders' Equity

 

 

  Plant and equipment (gross)

$

253,000 

  Preferred stock

$

23,000  

    Less: Accumulated depreciation

 

50,600 

  Common stock

 

58,000  

 

 

 

  Paid-in capital

 

28,000  

  Net plant and equipment

 

202,400 

  Retained earnings

 

73,700  

 



 



  Total assets

$

273,700 

  Total liabilities and stockholders' equity

$

273,700  

 





 





Sales for 2010 were $235,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was $23,500. Depreciation expense was 11 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 9 percent, while the interest rate on the bonds payable was 15 percent. This interest expense is based on December 31, 2009, balances. The tax rate averaged 20 percent.

$2,300 in preferred stock dividends were paid and $9,560 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding.

During 2010, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 9 percent. A new machine was purchased on December 31, 2010, at a cost of $38,000.

Accounts payable increased by 35 percent. Notes payable increased $6,300 and bonds payable decreased $11,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change.

(a) Prepare an income statement for 2010.

(b) Prepare a statement of retained earnings for 2010.

(c) Prepare a balance sheet as of December 31, 2010.

Reference no: EM13327213

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