a. (Income statement) At the end of its third year of operations, the Best Manufacturing Co. had $4,500,000 in revenues; $3,375,000 in cost of goods sold; $450,000 in operating expenses, which included depreciation expense of $150,000; and had a tax liability equal to 35 percent of the firm’s taxable income. What is the net income of the firm for the year? b. Best Manufacturing Co. plans to reinvest $50,000 of its earnings back in the firm. What does this plan leave for the payment of a cash dividend to Best’s stockholders? 2. (Income statement) If the Mayfield Steel Fabrication Company earned $500,000 in net income and paid a cash dividend of $300,000 to its stockholders, what are the firm’s earnings per share if the firm has 100,000 shares of stock outstanding? 3. (Review of financial statements) Prepare a balance sheet and income statement for the Terrence Company from the following scrambled list of items: Depreciation expense $66,000 Cash 225,000 Long-term debt 334,000 Sales 573,000 Accounts payable 102,000 General and administrative expense 79,000 Buildings and equipment 895,000 Notes payable 75,000 Accounts receivable 167,500 Interest expense 4,750 Accrued expenses 7,900 Common stock 289,000 Cost of goods sold 297,000 Inventory 99,300 Taxes 50,500 Accumulated depreciation 263,000 Taxes payable 53,000 Retained earnings 262,900.
1. Prepare an income statement for the Terrence Company.
2. Prepare a balance sheet for the Terrence Company.
3. What can you say about the firm’s financial condition based on these financial statements?