the following information was obtained from the records of s

The following information was obtained from the records of Shae, Inc.: 5 112 500 Notes payable (long-term) Sales Buildings and equipment Selling. general, and administrative expenses Accounts receivable Common stock (34,000 shares) Income tax expense Cash Retained earnings, 1/1/16 Accrued liabilities Cost of goods sold 37 500 26.250 201,662 7.500 01.250 Interest expense Accounts payable Dividends declared and paid during 2016 37 500 1,638 Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2016, and that all income statement items reflect activities that occurred during the year ended December 31, 2016. There were no changes in paid-in capital during the year Required: a. Prepare an income statement and statement of changes in stockholders equity for the year ended December 31, 2016, and a balance sheet at December 31, 2016, for Shae, Inc. Based on the financial statements that you have prepared for part a, answer the questions in parts b-e ncome Statement of goods sold proft aming belore taxes ax expense Paid-in capital

Solution

Solution:

a) Income statement and statement of change in equity is already prepared and same is correct.

b) Avearge income tax rate = Income tax / Earning before tax * 100 = $26,250/$87,500*100 = 30%

c) Interest rate charged on long term debt = Interest expense / Long term debt *100 = $25,000 / $125,000*100 = 20%

d) Par value of share of common stock = Paid up capital / Nos of shares = $170,000/34000 = $5 per share

e) Company\'s dividend policy = Proporation of earnings used for dividend = Dividend paid / Earning after tax * 100

= $11,638 / $61,250*100 = 19%