Question

Consider the following income statement for the Heir Jordan Corporation:

  

HEIR JORDAN CORPORATION Income Statement
Sales					$	43,200
Costs						34,000
Taxable income					$	9,200
Taxes (24%)						2,208
Net income					$	6,992
Dividends	$	3,700
Addition to retained earnings		3,292

  

The balance sheet for the Heir Jordan Corporation follows. Based on this information and the income statement, supply the missing information using the percentage of sales approach. Assume that accounts payable vary with sales, whereas notes payable do not. (Leave no cells blank - be certain to enter "0" whenever the item is not a constant percentage of sales. Enter each answer as a percent rounded 2 decimal places, e.g., 32.16.)

  

Percentage of Sales HEIR JORDAN CORPORATION Balance Sheet Percentage of Sales Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable $ $ Assets Current assets Cash Accounts receivable Inventory Total $ 4,000 8,300 2,400 5,400 9,000 16,800 $ $ 12,300 21,000 $ Fixed assets Net plant and equipment $ 37,400 Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners' equity 13,000 7,900 20,900 54,200 $ $ Total assets 54,200

Answer 1

Solution

Heir Jordan Corporation
Balance Sheet
	(i)	Percentage of sales (i) / $43,200		(ii)	Percentage of sales (ii) / $43,200
Assets			Liabilities and Owner's Equity
Current assets			Current Liabilities
Cash	$            2,400	5.56%	Accounts Payable	$ 4,000	9.26%
Accounts Receivables	$ 5,400	12.50%	Notes payable	$ 8,300	0
Inventory	$            9,000	20.83%
Total	$         16,800	38.89%	Total	$ 12,300	0
			Long term Debt	$            21,000	0
Fixed Assets			Owner's Equity
Net Plant and Equipment	$         37,400	86.57%	Common stock and paid - in surplus	$ 13,000	0
			Retained Earnings	$ 7,900	0
			Total	$            20,900	0
Total assets	$         54,200	125.46%	Total Liabilities and Owner's Equity	$            54,200	0

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