Paarl Manufacturing

As of the end of the month

Assets

Current assets

Total Current Assets

Long$-$term assets

$]$

Total Long$-$Term Assets

Total assets

Liabilities and Owners' Equity

Current Liabilities

Total Current Liabilities

Long$-$term Liabilities

Total Long$-$Term Liabilities

Total Liabilities

Owners' Equity

Total Owners' Equity

Total Liabilities and Owners' Equity

Now, construct an income statement for this month. $($Use parentheses or a minus sign for a net loss.$)$ Now, construct an income statement for this month. $($Use parentheses or a minus sign for a net loss.$)$

Income Statement

Paarl Manufacturing

for the month ended

Revenues

Net income from sales

Expenses

Total expenses

Income before taxes

Taxes

Net income

Now determine whether the company should release some of its retained earnings through dividends at this time by calculating the equity ratio.

The equity ratio is

$($Round to three decimal places as needed.$)$

Should the company release some of its retained earnings through dividends at this time?

A$.$ Since the equity ratio is low, the company has a low amount of debt. The company should issue dividends to make its shareholders happy.

B$.$ Since the equity ratio is high, the company has too much debt. The company should not issue dividends so it can reduce its debt.

C$.$ Since the equity ratio is high, the company has a low amount of debt. The company should issue dividends to make its shareholders happy.

D$.$ Since the equity ratio is low, the company has too much debt. The company should not issue dividends so it can reduce its debt.At the end of last month, Paarl Manufacturing had $$45,962$ in the bank. It owed the bank $$226,000$ for their mortgage. It also had a

working capital loan of $$31,000.$ Its customers owed $$22,947$ and it owed its suppliers $$12,997.$ The company owned property worth

$$242,000.$ It had $$124,500$ in finished goods, $$102,500$ in raw materials, and $$41,000$ in work in progress. Its production equipment was worth

$$444,000$ when new $($partially paid for by a large government loan due to be paid back in three years$)$ but had accumulated a total of

$$234,000$ in depreciation$-$ $$33,000$ worth last month.

The company has investors who put up $$99,000$ for their ownership. It has been reasonably profitable; this month the gross income from

sales was $$222,000,$ and the costs associated with sales was only $$39,500.$ Expenses were also relatively low; salaries were $$47,000$

last month, while the other expenses were depreciation, maintenance at $$1560,$ advertising at $$3550,$ and insurance at $$340.$ In spite of

$$32,906$ in accrued taxes $($Paarl pays taxes at $40$ percent$),$ the company had retained earnings of $$133,000.$

Construct a balance sheet $($as of the end of this month$)$ and income statement $($for this month$)$ for Paarl Manufacturing. Should the company

release some of its retained earnings through dividends at this time?

First, construct a balance sheet as of the end of this month. Start with the assets section of the balance sheet and then the liabilities and

owners' equity sections.