The contribution format income statement for Huerra Company for last year is given below:

	Total		Unit
Sales	$	1,008,000	$	50.40
Variable expenses		604,800		30.24
Contribution margin		403,200		20.16
Fixed expenses		319,200		15.96
Net operating income		84,000		4.20
Income taxes @ 40%		33,600		1.68
Net income	$	50,400	$	2.52

The company had average operating assets of $508,000 during the year.

Required:

4. The company issues bonds and uses the proceeds to purchase machinery and equipment that increases average operating assets by $126,000. Interest on the bonds is $20,000 per year. Sales remain unchanged. The new, more efficient equipment reduces production costs by $8,000 per year.

5. As a result of a more intense effort by sales people, sales are increased by 15%; operating assets remain unchanged.

6. At the beginning of the year, obsolete inventory carried on the books at a cost of $16,000 is scrapped and written off as a loss.

7. At the beginning of the year, the company uses $182,000 of cash (received on accounts receivable) to repurchase and retire some of its common stock.