In preparing the balance sheets, remember that shareholders’ equity is the residual. With this in mind, Mara’s balance sheets are as follows:

Notice that we’ve used an average 35 percent tax rate. Also notice that the addition to retained earnings is just net income less cash dividends.

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MARA CORPORATION Balance sheets as of December 31, 1998 and 1999 1998 1999 1998 1999 Current assets $2,205 $ 2,429 Net fixed assets 7,344 7,650 Current liabilities Long-term debt $1,003 $ 1,255 3,106 2,085 Equity 5,440 6,739 Total assets $9,549 $10,079 Total liabilities and shareholders' equity $9,549 $10,079 The income statement is straightforward: MARA CORPORATION 1999 Income Statement Sales Cost of goods sold $4,507 2,633 Depreciation Earnings before interest and taxes Interest paid 952 $ 922 Taxable income 196 $ 726 Taxes (35%) Net income Dividends Addition to retained earnings 254 $ 472 $250 222