Overall requirements: Construct Financial Statements.

In this problem you will be required to utilize proper formatting to construct an Income Statement, Statement of Retained Earnings, and Balance Sheet in Excel. Then you must provide the statements with an evaluation of their strengths and weaknesses to a hypothetical supervisor. The format will simulate an email (see Template file). Use good business writing - concise with statements pasted professionally into Template file. Submit Excel file separately but referenced as attachment to evaluation write-up.

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

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Current AssetsLiabilities

Cash................................................ $ 15,000Accounts payable...............$ 17,000

Accounts receivable........................... 20,000Notes payable........................................................ 25,000

Inventory............................................ 30,000Bonds payable........................................................ 55,000

Prepaid expenses................................ 12,500

Fixed AssetsStockholders' Equity

Plant and equipment (gross)..... ... $255,000Preferred stock.......................................................... $25,000

Less: Accumulated.....................................Common stock............................................................ 60,000

depreciation..................................... 51,000Paid-in capital.......................................................... 30,000

Net plant and equipment..............$204,000Retained earnings ..............69,500

.......................................................................Total liabilities and

Total assets..................................... $281,500stockholders' equity....................................................... $281,500

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Sales for 20X2 were $245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was $24,500. Depreciation expense was 8 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while the interest rate on the bonds payable was 12 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 20 percent.

$2,500 in preferred stock dividends were paid, and $5,500 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 10 percent. A new machine was purchased on December 31, 20X2, at a cost of $40,000.

Accounts payable increased by 20 percent. Notes payable increased by $6,500 and bonds payable decreased by $12,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change.

a.Prepare an income statement for 20X2.

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

c.Prepare a balance sheet as of December 31, 20X2.