International Imports Inc.'s Pretransaction Statement of Financial Condition Cash $15,000 Accounts payable $20,000 Marketable securities 10,000 Wages payable 20,000 Accounts receivable 470,000 Taxes payable 10,000 Inventory 500,000 Notes payable 50,000 Prepaid expenses 5,000 Total current liabilities 100,000 Total current assets 1,000,000 Long-term debt 500,000 Total liabilities 600,000 Gross plant and equipment 1,500,000 Common stock 150,000 Accumulated depreciation 500,000 Capital paid in excess of par 350,000 Net plant and equipment 1,000,000 Retained earnings 900,000 Total equity 1,400,000 Total assets $2,000,000 Total debt and equity $2,000,000 International Imports Inc.'s Pretransaction Statement of Financial Performance Sales $5,000,000 Less: Cost of goods sold 1 2,000,000 Gross profit 3,000,000 Less: Operating expenses 600,000 Operating profit (EBIT) 2,400,000 Less: Interest expense 2 33,000 Earnings before taxes (EBT) 2,367,000 Less: Tax expense 3 828,450 Net income $1,538,550 1 Cost of goods sold equals 40% of sales. 2 Interest expense equals 6% of the combined notes payable and long-term debt balances. 3The average federal and state tax rate is 35%. Indicate if any of the listed financial statement accounts is affected by the following business transactions and whether the listed ratios will increase, decrease, or remain unchanged as a result of the transaction. (Hint: Assume that the business transaction occurs exactly as stated without interpreting it further. Do not consider any related transactions that may occur before or after the specified transaction. Assume there are 365 days in a year.) International Imports Inc. (21) sells 25,000 shares of new common stock ($1 per share par value) to new and existing shareholders for $20 per share. Financial Account Check if the Account Is Affected by the Specified Transaction Cash Operating income Long-term debt Common stock Capital paid-in excess of par Financial Ratio Ratio's Behavior Inventory turnover Debt ratio Times interest earned Operating profit margin Basic earnings power Current ratio Business Transaction 2 International Imports Inc. (21) pays $10,000 of its federal and state taxes payable. Financial Account Check if the Account Is Affected by the Specified Transaction Taxes payable Long-term debt Prepaid expenses Cash Net income Financial Ratio Ratio's Behavior Average collection period Debt ratio Times interest earned Operating profit margin Return on assets Quick ratio International Imports Inc.'s Pretransaction Statement of Financial Condition Cash $15,000 Accounts payable $20,000 Marketable securities 10,000 Wages payable 20,000 Accounts receivable 470,000 Taxes payable 10,000 Inventory 500,000 Notes payable 50,000 Prepaid expenses 5,000 Total current liabilities 100,000 Total current assets 1,000,000 Long-term debt 500,000 Total liabilities 600,000 Gross plant and equipment 1,500,000 Common stock 150,000 Accumulated depreciation 500,000 Capital paid in excess of par 350,000 Net plant and equipment 1,000,000 Retained earnings 900,000 Total equity 1,400,000 Total assets $2,000,000 Total debt and equity $2,000,000 International Imports Inc.'s Pretransaction Statement of Financial Performance Sales $5,000,000 Less: Cost of goods sold 1 2,000,000 Gross profit 3,000,000 Less: Operating expenses 600,000 Operating profit (EBIT) 2,400,000 Less: Interest expense 2 33,000 Earnings before taxes (EBT) 2,367,000 Less: Tax expense 3 828,450 Net income $1,538,550 1 Cost of goods sold equals 40% of sales. 2 Interest expense equals 6% of the combined notes payable and long-term debt balances. 3The average federal and state tax rate is 35%. Indicate if any of the listed financial statement accounts is affected by the following business transactions and whether the listed ratios will increase, decrease, or remain unchanged as a result of the transaction. (Hint: Assume that the business transaction occurs exactly as stated without interpreting it further. Do not consider any related transactions that may occur before or after the specified transaction. Assume there are 365 days in a year.) International Imports Inc. (21) sells 25,000 shares of new common stock ($1 per share par value) to new and existing shareholders for $20 per share. Financial Account Check if the Account Is Affected by the Specified Transaction Cash Operating income Long-term debt Common stock Capital paid-in excess of par Financial Ratio Ratio's Behavior Inventory turnover Debt ratio Times interest earned Operating profit margin Basic earnings power Current ratio Business Transaction 2 International Imports Inc. (21) pays $10,000 of its federal and state taxes payable. Financial Account Check if the Account Is Affected by the Specified Transaction Taxes payable Long-term debt Prepaid expenses Cash Net income Financial Ratio Ratio's Behavior Average collection period Debt ratio Times interest earned Operating profit margin Return on assets Quick ratio