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 (35%)						3,220
Net income					$	5,980
Dividends	$	2,700
Addition to retained earnings		3,280

  

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.

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

Answer 1

HEIR JORDAN CORPORATION
BALANCE SHEET
		Percentage of sales			Percentage of sales
Assets			Liabilities and Owners’ Equity
Current assets			Current liabilities
Cash	2,400	5.59%	Accounts payable	4,000	9.32%
Account Receivables	5,400	12.59%	Notes payable	8,300	0%
Inventory	9,000	20.98%
Total	16,800	39.16%	Total	12,300	0%
			Long-term debt	21,000	0%
Fixed Assets			Owners’ equity
Net Plant and equipments	37,400	87.18%	Common stock and paid-in surplus	13,000	0%
			Retained earnings	7,900	0%
			Total	20,300	0%
Total Assets	54,200	126.34%	Total liabilities and owners’ equity	54,200	0%