The information on the following page was obtained from the records of Breanna Inc.:    Accounts receivable$10,700Accumulated depreciation 50,700Cost of goods sold 121,000Income tax expense 8,500Cash 62,000Net sales 203,000Equipment 127,000Selling, general, and administrative expenses 36,000Common stock (8,000 shares) 94,000Accounts payable 13,900Retained earnings, 1/1/19 28,800Interest expense 5,900Merchandise inventory 38,500Long-term debt 35,000Dividends declared and paid during 2019 15,800 Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2019, and that all income statement items reflect activities that occurred during the year ended December 31, 2019. There were no changes in paid-in capital during the year.Required:Prepare an income statement and statement of changes in stockholders' equity for the year ended December 31, 2019, and a balance sheet at December 31, 2019, for Breanna Inc. Based on the financial statements that you have prepared for part a, answer the questions in parts b-e.What is the company's average income tax rate?What interest rate is charged on long-term debt? Assume that the year-end balance of long-term debt is representative of the average long-term debt account balance throughout the year.What is the par value per share of common stock?What is the company's dividend policy (i.e., what proportion of the company's earnings is used for dividends)?

Question
Asked Jan 30, 2020
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The information on the following page was obtained from the records of Breanna Inc.:
 

     
Accounts receivable $ 10,700
Accumulated depreciation   50,700
Cost of goods sold   121,000
Income tax expense   8,500
Cash   62,000
Net sales   203,000
Equipment   127,000
Selling, general, and administrative expenses   36,000
Common stock (8,000 shares)   94,000
Accounts payable   13,900
Retained earnings, 1/1/19   28,800
Interest expense   5,900
Merchandise inventory   38,500
Long-term debt   35,000
Dividends declared and paid during 2019   15,800
 


Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2019, and that all income statement items reflect activities that occurred during the year ended December 31, 2019. There were no changes in paid-in capital during the year.

Required:

  1. Prepare an income statement and statement of changes in stockholders' equity for the year ended December 31, 2019, and a balance sheet at December 31, 2019, for Breanna Inc. Based on the financial statements that you have prepared for part a, answer the questions in parts b-e.
  2. What is the company's average income tax rate?
  3. What interest rate is charged on long-term debt? Assume that the year-end balance of long-term debt is representative of the average long-term debt account balance throughout the year.
  4. What is the par value per share of common stock?
  5. What is the company's dividend policy (i.e., what proportion of the company's earnings is used for dividends)?

 

 

 

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Expert Answer

Step 1: 1. Income statement, Retained earnings and balance sheet.

Accounting homework question answer, step 1, image 1

Step 2: Calculate the average income tax rate.

Accounting homework question answer, step 2, image 1

Step 3: Calculate the interest on long-term debt.

Accounting homework question answer, step 3, image 1

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