The following is the December 31, 2003 balance sheet for the Epics Corporation. - 4721

Solution Posted by
UoPExpert

UoPExpert

Rating : (2)F
Solution Detail
Price: $1.30
  • From: ,
  • Posted on: Thu 29 Mar, 2012
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description

The following is the December 31, 2003 balance sheet for the Epics Corporation.

 

Assets Liabilities

Cash $ 70,000 Accounts Payable $ 100,000

Accounts Receivable 150,000 Notes Payable 120,000

Inventory 280,000 Bonds Payable 300,000

Total Current Assets $ 500,000 Total Liabilities $ 520,000

Plant and Equipment $1,250,000 Equity 

Less: Accum. Deprec. 250,000 Common Stock 300,000

Net plant and Equipment $1,000,000 Paid In Capital 200,000

Retained Earnings 480,000

Total Assets $1,500,000 Total Equity $ 980,000

Total Liab. & Equity $1,500,000

 

Sales for 2003 were $2,000,000, with the cost of goods sold being 55% of sales. Depreciation expense was 10% of the gross plant and equipment at the beginning of the year. Interest expense was 9% on the notes payable and 11% on the bonds payable. Selling and administrative expenses were $200,000 and the firm's tax rate is 40%.

 

Prepare an income statement. 

 

Difficulty: Medium 

Answer: 

 

Income Statement

Sales $2,000,000

Less: Cost of Goods Sold 1,100,000

Gross Profit 900,000

Less: Selling and Administrative Expense 200,000

Depreciation expense 125,000

EBIT 575,000

Less: Interest Expense (10,800 + 33,000) 43,800

EBT 531,200

Less: Taxes (40%) 212,480

Net Earnings $ 318,720

Solution Description

The following is the December 31, 2003 balance sheet for the Epics Corporation.

Assets Liabilities
Cash $ 70,000 Account