Question 2:(20 marks)

ABC Ltd. reported the following income statement and balance sheet related information in 2020. The firm is subject to 30% statutory tax rate.

2020 income statement (in millions of dollars)

Sales

4280

Operating Expenses to Generate Sales

(2805)

Loss from Real estate partnership

(170)

Loss from Asset impairment

(100)

Interest Income

90

Interest Expense

(300)

995

Income Tax Expense

(270)

Net Income

725

2020 Balance sheet information (in millions of dollars)

Accounts Payable

1,800

Trade Receivable

1,290

Common Equity

1,668

Property Plant and Equipment

4,351

Accrued Expenses

1,320

Cash Equivalents

753

Deferred tax liability

1,120

Working Cash

65

Preferred Stock

750

Inventory

4,314

Financing debt

4,320

Debt securities

500

Required:

a)Reformulate the income statement to obtain 'Operating income from sales after tax'

(10 marks)

b)Produce a reformulated balance sheet using the above balance sheet information.

(10 marks)