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At the end of last month,
Paarl
Manufacturing had
$45,963
in the bank. It owed the bank
$224,500
for their mortgage. It also had a working capital
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loan of
$30,500.
Its customers owed
$22,947
and it owed its suppliers
$12,984.
The company owned property worth
$240,000.
It had
$120,500
in finished goods,
$103,500
in raw materials, and
$42,000
in work in progress. Its production equipment was worth
$444,000
when new (partially paid for by a large government loan due to be paid back in three years) but had accumulated a total of
$236,000
in
depreciation$32,000
worth last month.
The company has investors who put up
$104,000
for their ownership. It has been reasonably profitable; this month the gross income from sales was
$224,000,
and the costs associated with sales was only
$38,000.
Expenses were also relatively low; salaries were
$44,500
last month, while the other expenses were depreciation, maintenance at
$1580,
advertising at
$3250,
and insurance at
$320.
In spite of
$32,919
in accrued taxes
(Paarl
pays taxes at
45
percent), the company had retained earnings of
$138,000.
Construct a balance sheet
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(as of the end of this month) and income statement
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(for this month) for
Paarl
Manufacturing. Should the company release some of its retained earnings through dividends at this time?
Part 2
First, construct a balance sheet as of the end of this month. Start with the assets
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section of the balance sheet and then the liabilities
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and owners' equity
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sections.
Answer & Explanation
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