Given the following data, prepare an income statement and balance sheet for calendar 2007 in as much detail as possible for Washburn’s, a retailing corporation. For all of 2007, Washburn’s had 100,000 shares of $1-par common stock outstanding, and had no dilutive securities. No dividends were declared or paid. Round all numbers in your financial statements to the nearest thousand dollars.
At December 31, 2007, Washburn’s had accounts payable of one million dollars. These constituted 2/3 of current liabilities, with the rest being accrued liabilities (including any income taxes payable). Cash balance was $180,000. Their only other assets were accounts receivable (net), plant and equipment (net), and inventory (unchanged from the beginning of the year). Interest expense on a long-term note (the only non-current liability) for 2007 is $300,000. You also know the following:
Income tax rate 30%
Times interest earned 5 times
Times interest earned 5 times
Inventory turnover 4 times
Interest rate on long-term debt 8%
Current ratio 2.4
Quick ratio .6
Total liabilities/equity 1:1
Gross margin 33 1/3%CLICK HERE FOR SOLUTION
