Prepare an income statement for the year ending December 31, 2018 and a balance sheet at December 31, 2018. Assume semiannual compounding of the bond interest.

Compute debt assets ratio and times interest earned ratio for 2017 and 2018. Vaughn's net income in 2017 was $500 and interest expense was $169.

The following information is taken from the 2017 annual report of Vaughn, Inc. Vugh's fiscal year ends December 31 of each year. Vaughs December 31, 2017, balance sheet is as follow Valining Balance Sheet December 31, 2017 Assets Cash Inventory Total current assets Plant and equipment Accumulated depreciation Total assets Liabilities Bonds payable (net of discount) Stockholders' equity Common stock Retained earnings Total liabilities and stockholders' equity $4.154 Note X: Long Term Debt: On January 1, 2016, Vaughn issued bonds with face value of $1.500 and a coupon rate equal to 10%. The bonds were issued to yield 12% and mature on January 1, 2021 Additional information concerning 2018 is as follows 1. Sales were $3.700 all for cash. 2. Purchases were $2.200 all paid in cash 3. Salaries were $640 all paid in cash. 4. Property, plant, and equipment was originally purchased for $2.200 and is deprecated straight line over a 25-year life with no salvace value 5. Ending inventory was $2.000 6. Cash dividends of $100 were declared and paid by Vaughn 7. Ignore taxes 8. The market rate of interest on bonds of similar risk was 12% during all of 2018 9. Interest on the bands is paid semiannually each June 30 and December 31