Challenge Problem Using the financial statements below,
Income Statements for Global Manufacturing, Inc.
|
YEARS ENDED DECEMBER 31 |
2010 |
2009 |
|
Net revenues or sales |
$700,000 |
$600,000 |
|
Cost of goods sold |
450,000 |
375,000 |
|
Gross profit |
250,000 |
225,000 |
|
Operating expenses: |
|
|
|
General and administrative |
95,000 |
95,000 |
|
Selling and marketing |
56,000 |
50,000 |
|
Depreciation |
25,000 |
20,000 |
|
Operating income |
74,000 |
60,000 |
|
Interest |
14,000 |
10,000 |
|
Income before taxes |
60,000 |
50,000 |
|
Income taxes (40%) |
24,000 |
20,000 |
|
Net income |
$36,000 |
$30,000 |
|
Number of shares outstanding |
50,000 |
50,000 |
|
Earnings per share |
$0.72 |
$0.60 |
Balance Sheets for Global Manufacturing, Inc.
|
YEARS ENDED DECEMBER 31 ASSETS |
2010 |
2009 |
|
Cash and marketable securities |
$25,000 |
$20,000 |
|
Accounts receivable |
100,000 |
80,000 |
|
Inventories |
125,000 |
100,000 |
|
Total current assets |
250,000 |
200,000 |
|
Gross plant and equipment |
300,000 |
225,000 |
|
Less: accumulated depreciation |
–100,000 |
–75,000 |
|
Net plant and equipment |
200,000 |
150,000 |
|
Land |
50,000 |
50,000 |
|
Total fixed assets |
250,000 |
200,000 |
|
Total assets |
$500,000 |
$400,000 |
|
LIABILITIES AND EQUITY |
|
|
|
Accounts payable |
$78,000 |
$65,000 |
|
Notes payable |
34,000 |
10,000 |
|
Accrued liabilities |
30,000 |
25,000 |
|
Total current liabilities |
142,000 |
100,000 |
|
Long-term debt |
140,000 |
100,000 |
|
Total liabilities |
$282,000 |
$200,000 |
|
Common stock ($1 par, 50,000 shares) |
$50,000 |
$50,000 |
|
Paid-in capital |
100,000 |
100,000 |
|
Retained earnings |
68,000 |
50,000 |
|
Total stockholders” equity |
218,000 |
200,000 |
|
Total liabilities and equity |
$500,000 |
$400,000 |
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