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  • Company DEF is preparing its financial statements for the year ended December 31st, 20XX.
  • The trial balance indicates total assets of $800,000 and total liabilities of $400,000.
  • Common stock and retained earnings are reported as $300,000 and $100,000, respectively.
  • Sales revenue for the year amounted to $1,200,000, with cost of goods sold of $600,000.
  • Operating expenses, including rent, utilities, and salaries, totaled $300,000 for the year.
  • The company also paid $20,000 in interest expense and $10,000 in income tax expense.

• Requirements:

  • Prepare a statement of retained earnings for Company DEF.
  • Compute the gross profit and operating profit margins.
  • Assess the financial leverage of the company using the debt ratio.
  • Analyze the profitability and financial stability of Company DEF based on the provided data.

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