(ST–3)

Excess Capacity Van Auken Lumber’s 2010 financial statements are shown below.

Van Auken Lumber: Balance Sheet as of December 31, 2010

(Thousands of Dollars)

Cash $ 1,800 Accounts payable $ 7,200 Receivables 10,800 Notes payable 3,472 Inventories 12,600 Accruals 2,520 Total current assets $25,200 Total current liabilities $13,192 Net fixed assets 21,600 Mortgage bonds 5,000 Common stock 2,000 Retained earnings 26,608 Total assets $46,800 Total liabilities and equity $46,800 Van Auken Lumber: Income Statement for December 31, 2010

(Thousands of Dollars)

Sales $36,000 Operating costs 30,783 Earnings before interest and taxes $ 5,217 Interest 717 Earnings before taxes $ 4,500 Taxes (40%) 1,800 Net income $ 2,700 Dividends (60%) $ 1,620 Addition to retained earnings $ 1,080