Johnson Corporation manufactures food processing equipment. Use Johnson Corporation's two most recent balance sheets and most recent income statement to view a statement of cash flows for 2010. The company paid dividends of $6,250 during 2010.

Johnson Corporation

Balance Sheet

As of December 31,

2010

2009

Assets:

Cash and cash equivalents

$41,900

$25,000

Accounts Receivable

24,000

6,250

Inventory

30,000

36,000

Current Assets

95,900

67,250

Equipment

42,000

38,500

Less: Accumulated depreciation

-14,000

-7,000

Land

25,000

10,000

Total assets

$148,900

$108,750

Liabilities

Accounts Payable

$17,500

$22,500

Accrued Salaries Payable

5,500

8,000

Rent Expense Payable

2,200

1,000

Income Tax Payable

6,900

4,000

Current Liabilities

32,100

35,500

Long-term note payable

50,000

30,000

Total Liabilities

82,100

65,500

Stockholders' Equity:

Common stock

42,000

30,000

Retained earnings

24,800

13,250

Total liabilities and stockholders' equity

$148,900

$108,750

Johnson Corporation

Income Statement

For the year ended December 31, 2010

Revenues

$147,000

Cost of goods sold

-84,000

Gross Profit

$63,000

Operating Expenses

Depreciation expense

-7,000

Salary expense

-14,600

Insurance Expense

-2,500

Rent Expense

-10,000

Interest Expense

-4,200

Total Operating Expenses

-38,300

Income from Operations

24,700

Income Tax Expense

-6,900

Net income

$17,800

II.Using this analytical framework below indicate the effect of each of the following transactions for CX Corporation:

1.

CX Corporation purchases land for $450,000 cash.

2.

At the end of the period CX Corporation receives an appraisal that values the land at $540,000.

3.

During the next period CX Corporation sells the land for $665,000.

4.

CX pays taxes at a rate of 40%.

CASH

NON-CASH ASSETS

=

LIABILITIES

CONTRIBUTED CAPITAL

AOCI

RETAINED EARNINGS

III. The following balance sheet and income statement pertain to Enron Corp., using the following assumptions view a forecasted 2013 income statement:

Assumptions for 2013:

Revenue growth rate

45%

COGS

70% of sales

Operating expenses

18% of sales

Interest expense

12% of beginning long-term debt

Tax rate

35%

Enron Corp. Consolidated Statement of Income

(Thousands except per share amounts)

2012

Net Revenues

$345,871

Cost of Revenue

(226,546)

SG&A

(83,009)

Operating Income

36,316

Interest Expense

(484)

Income Before Income Taxes

35,832

Income taxes

(12,541)

Net Income

$23,291

Enron Corp Consolidated Balance Sheet

(Thousands)

2012

Current Assets

Cash and Equivalents

7,905

Merchandise inventory

6,308

Accounts receivable

6,614

PPE (including intangibles), net

39,458

Total Assets

60,285

Liabilities and Stockholders' Equity

Accounts payable

9,643

Long-term debt

13,500

Shareholders' Equity

Common stock and APIC

28,613

Retained earnings

8,529

Total Liabilities and Shareholders' Eq.

60,285

IV.Arco Company

These data represent a summary of your first-iteration forecast amounts for Year 1. Arco uses dividends as a flexible financial account.

Year + 1

Operating Income

$ 58

Interest Expense

8

Income before Tax

$ 50

Tax Provision (20.0 percent effective tax rate)

10

Net Income

$ 40

Total Assets

$200

Accrued Liabilities

$ 43

Long-Term Debt

$ 80

Common Stock, at par

$ 20

Retained Earnings (at the beginning of Year 1)

$ 34

See the information for Arco Company.

Compute the amount of dividends you can assume that Arco will pay in order to balance your projected balance sheet. Present the projected balance sheet.