For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:

Current Assets			Liabilities
Cash	$	23,000	Accounts payable	$	25,000
Accounts receivable		28,000	Notes payable		33,000
Inventory		38,000	Bonds payable		63,000
Prepaid expenses		13,300
Fixed Assets			Stockholders Equity
Gross plant and equipment	$	263,000	Preferred stock	$	33,000
Less: Accumulated depreciation		52,600	Common stock		68,000
			Paid in Capital		38,000
Net plant and equipment	$	210,400	Retained earnings		52,700
Total assets	$	312,700	Total liabilities and stockholders equity	$	312,700

Sales for 20X2 were $285,000, and the cost of goods sold was 55 percent of sales. Selling and administrative expense was $28,500. Depreciation expense was 11 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 9 percent, while the interest rate on the bonds payable was 15 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 30 percent. $3,300 in preferred stock dividends were paid, and $8,370 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 9 percent. A new machine was purchased on December 31, 20X2, at a cost of $48,000. Accounts payable increased by 20 percent. Notes payable increased by $7,300 and bonds payable decreased by $16,500, both at the end of the year. The preferred stock, common stock, and capital paid in excess of par accounts did not change. a. Prepare an income statement for 20X2. (Round EPS answer to 2 decimal places.)

b. Prepare a statement of retained earnings for 20X2.

c. Prepare a balance sheet as of December 31, 20X2. (Amounts to be deducted should be indicated with parentheses or a minus sign.)

Answer is complete but not entirely correct. Baxter Corporation 20X2 Income Statement $ Sales 285,000 Cost of goods sold (156,750) Gross profit 128,250 Selling and administrative expense (28,500) Depreciation expense (28,930) 70,820 Operating profit Interest expense (9,747) 61,073 Earnings before taxes Taxes (18,322) Earnings after taxes 42,751 Preferred stock dividends Earnings available to common stockholders (3,300) 39,451 Shares outstanding 10,000 Earnings per share 3.95 Answer is complete but not entirely correct. Baxter Corporation 20X2 Statement of Retained Earnings Retained earnings balance, January 1, 20X2 Add: Earnings available to common stockholders, 20X2 $ 52,700 42,751 Less: Cash dividend declared in 20X2 (11,670) Retained earnings balance, December 31, 20X2 $ 83,781 Answer is not complete Baxter Corporation 20X2 Balance Sheet Assets Liabilities and Stockholders' Equity Accounts payable Notes payable Current Assets: $ 23,000 Cash Bonds payable Accounts receivable 30,520 Inventory 41,420 Prepaid expenses 13,300 $108,240 $ Total current assets Total liabilities Stockholders' Equity Preferred stock Fixed assets: 33,000 Gross plant and equipment 68,000 Common stock Less: Accumulated depreciation Net plant and equipment Capital paid in excess of par 38,000 Retained earnings 52,000 0 $191,000 $191,000 Total stockholders' equity Total liabilities and stockholders' equity $108,240 Total assets