Reference no: EM132983875

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

• Sales for 2010 were $220,000, and the cost of goods sold was 60 percent of sales.
• Selling and administrative expense was $22,000.
• 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, 2009, balances. The tax rate averaged 20 percent. Two thousand dollars in preferred stock dividends were paid and $8,400 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 10 percent.
• A new machine was purchased on December 31, 2010, at a cost of $35,000.
• Accounts payable increased by 25 percent.
• Notes payable increased $6,000 and bonds payable decreased $10,000, both at the end of the year.
• The preferred stock, common stock, and paid-in capital in excess of par accounts did not change.

Problem a. Prepare an income statement for 2010.

Problem b. Prepare a statement of retained earnings for 2010.

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