The following information was drawn from the annual report of Machine Import Company (MIC):

Required:-

a. Compute the percentage of growth in net income from 2001 to 2002. Can stockholders expect a similar increase between 2002 and 2003?

b. Assuming that MIC collected \($200,000\) cash from earnings (net income), explain how this money was spent in 2002.

c. Assuming that MIC experiences the same percentage of growth from 2002 to 2003 as it did from 2001 to 2002, determine the amount of income from continuing operations that the owners can expect to see on the 2003 income statement.

d. During 2003, MIC experienced a \($40,000\) loss due to storm damage (note that this would be shown as an extraordinary loss on the income statement). Liabilities and common stock were unchanged from 2002 to 2003. Use the information that you computed in Part c plus the additional information provided in the previous two sentences to prepare an income statement for 2003 and balance sheet as of December 31, 2003.

Transcribed Image Text:

2001 For the Years 2002 Income Statements Revenue $600,000 $690,000 Operating Expenses 480,000 552,000 Income from Continuing Operations 120,000 138,000 Extraordinary Item--Lottery Win 62,000 Net Income $120,000 $200,000 Assets Liabilities $880,000 $880,000 $200,000 $ 0 Stockholders' Equity Common Stock 380,000 380,000 Retained Earnings 300,000 500,000 Total Liabilities and Stockholders' Equity $880,000 $880,000