Finance $1$ FINA $3010$

Question $1$

For December $31,2021,$ the balance sheet for Gratiae Corporation is as follows:

Gratiae Corporation

Balance Sheet

For the year ended December $21,2021$

Assets

Current Assets

Cash $$10,000$

Accounts receivable $15,000$

Inventory $25,000$

Prepaid expenses $12,000$

Total Current Assets $62,000$

Plant and equipment $250,000$

Less: Accumulated amortization $50,000$

Net Plant and Equipment $200,000$

Total Assets $$262,000$

Liabilities

Current Liabilities

Accounts payable $$12,000$

Notes payable $20,000$

Total Current Liabilities $32,000$

Bonds payable $50,000$

Total Liabilities $82,000$

Shareholders$$ Equity

Common Stock $32,000$ shares issued and outstanding $75,000$

Retained earnings $105,000$

Total Shareholders$$ Equity $180,000$

Total Liabilities and Shareholders$$ Equity $$262,000$

Sales for $2022$ were $$220,000,$ with cost of goods sold being $60\%$ of sales. Amortization expense was $10$

percent of net plant and equipment at the beginning of the year. Interest expense for the bonds payable

was $8\%$ while interest on the notes payable was $10\%.$ The interest is calculated on the December $31,$

$2021$ balances. Selling and administration expenses were $$22,000$ and the corporate income tax rate

was $18\%.$

During $2022,$ the cash balance and prepaid expenses remained unchanged. Accounts receivable and

inventory each increased by $10\%$ and accounts payable increased by $25\%.$ A new machine was

purchased on December $31,2022$ at a cost of $$35,000.$ A cash dividend of $$12,800$ was paid to common

shareholders at the end of $2022.$ Also, notes payable increased by $$6,000$ and bonds payable decreased

by $$10,000.$ The common stock account did not change.

Required

Answer the following questions using Excel. To save time, copy and paste the above balance sheet to

your worksheet.

a$)$ Prepare an income statement for $2022.$

b$)$ Prepare a balance sheet for the year ended December $31,2022.$ You must get your $2022$ balance

sheet to balance before you begin the statement of cash flow.

c$)$ Prepare a statement of cash flow for the year ended December $31,2022.$

Question $2$:

Diver River Company has current operating profit of $$200,000$ before taxes. Interest expense is $$10,000$

dividends paid on preferred shares were $$18,750,$ and common dividends paid of $$30,000.$ The company

paid taxes of $$38,250.$ The company has $20,000$ outstanding common shares.

a$.$ Calculate the EPS and common dividend per share

b$.$ Calculate the payout ratio

c$.$ If the share price is $$41\mathrm{.}23,$ calculate the price$-$earnings $($P$/$E$)$ ratio.