P2–1-JustAnswer.docVIP

Solutions Guide: ? Please do not present as your own.? I sometimes post solutions that are totally mine, from the book’s solutions manual, or a mix of my work and the books solutions manual. But this is only meant as a solutions guide for you to answer the problem on your own. I recommend doing this with any content you buy online whether from me or from someone else. P2–1 Reviewing basic financial statements The income statement for the year ended December 31, 2006, the balance sheets for December 31, 2006 and 2005, and the statement of retained earnings for the year ended December 31, 2006, for Technica, Inc., are given on pages?82?and?83?. Briefly discuss the form and informational content of each of these statements. Technica, Inc.?Income Statement?for the Year Ended December 31, 2006 Sales revenue ? $600,000 Less: Cost of goods sold ? 460,000 Gross profits ? $140,000 Less: Operating expenses General and administrative expenses $30,000 ? Depreciation expense 30,000 ? Total operating expense ? 60,000 Operating profits ? $ 80,000 Less: Interest expense ? 10,000 Net profits before taxes ? $ 70,000 Less: Taxes ? 27,100 Earnings available for common stockholders ? $ 42,900 Earnings per share (EPS) ? $2.15 Technica, Inc.?Balance Sheets ? December 31 Assets 2006 2005 Cash $ 15,000 $ 16,000 Marketable securities 7,200 8,000 Accounts receivable 34,100 42,200 Inventories 82,000 50,000 Total current assets $138,300 $116,200 Land and buildings $150,000 $150,000 Machinery and equipment 200,000 190,000 Furniture and fixtures 54,000 50,000 Other 11,000 10,000 Total gross fixed assets $415,000 $400,000 Less: Accumulated depreciation 145,000 115,000 Net fixed assets $270,000 $285,000 Total assets $408,300 $401,200 Liabilities and Stockholders’ Equity Accounts payable $ 57,000 $ 49,000 Notes payable 13,000 16,000 Accruals 5,000 6,000 Total current liabilities $ 75,000 $ 71,000 Long-term debt $150,000 $160,000 Stockholders’ equity ? ? Common stock equity (shares outstanding: