Advanced Problems 27. For December 31, 20X1, the balance sheet of Baxter Corporation was as follows: Current Assets Cash..... Accounts receivable Inventory.... Prepaid expenses... Fixed Assets Plant and equipment (gross)..... Less: Accumulated depreciation... Net plant and equipment......... Total assets. $ 15,000 20,000 30,000 12,500 $255,000 51,000 $204,000 $281,500 Liabilities Accounts payable... Notes payable. Bonds payable Stockholders' Equity Preferred stock.. Common stock. Paid-in capital Retained earnings Total liabilities and stockholders' equity... $ 17,000 25,000 55,000 b. Prepare a statement of retained earnings for 20X2. C. Prepare a balance sheet as of December 31, 20X2. $ 25,000 60,000 30,000 69,500 $281,500 Sales for 20X2 were $245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was $24,500. Depreciation expense was 8 percent of plant and equipment (gross) at the beginning of the year. Inter- est expense for the notes payable was 10 percent, while the interest rate on the bonds payable was 12 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 20 percent. $2,500 in preferred stock dividends were paid, and $5,500 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding. During 20X2, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 10 percent. A new machine was purchased on December 31, 20X2, at a cost of $40,000. Accounts payable increased 20 percent. Notes payable increased by $6,500 and bonds payable decreased by $12,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change. a. Prepare an income statement for 20X2. Construction of income statement and balance sheet (LO2-1 & 2-3)

27. For December 31, 20X1, the balance sheet of Baxter Corporation was as follows: Sales for 202 were $245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was \$24.500. Depreciation expense was 8 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while the interest rate on the bonds payable was 12 percent. This interest expense is based on December 31 . 20X1 balances. The tax rate averaged 20 percent. $2,500 in preferred stock dividends were paid, and $5,500 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding. During 202, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 10 percent. A new machine was purchased on December 31,20X2, at a cost of $40,000. Accounts payable increased by 20 percent. Notes payable increased by $6,500 and bonds payable decreased by $12,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change. a. Prepare an income statement for 20X2. b. Prepare a statement of retained earnings for 20X2. c. Prepare a balance sheet as of December 31,20X2. 27. For December 31, 20X1, the balance sheet of Baxter Corporation was as follows: Sales for 202 were $245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was \$24.500. Depreciation expense was 8 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while the interest rate on the bonds payable was 12 percent. This interest expense is based on December 31 . 20X1 balances. The tax rate averaged 20 percent. $2,500 in preferred stock dividends were paid, and $5,500 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding. During 202, the cash balance and prepaid expenses balances were unchanged. Accounts receivable and inventory increased by 10 percent. A new machine was purchased on December 31,20X2, at a cost of $40,000. Accounts payable increased by 20 percent. Notes payable increased by $6,500 and bonds payable decreased by $12,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change. a. Prepare an income statement for 20X2. b. Prepare a statement of retained earnings for 20X2. c. Prepare a balance sheet as of December 31,20X2