Cricket Corporation's financial statements for 2003 showed the following:

Notice in these data that the company had a debt of only $20,000 compared with common stock outstanding of $200,000. A consultant recommended the following: debt. $100,000 (at 10 percent) instead of $20,000 and common stock outstanding of $120,000 (12,000 shares) instead of $200,000 (20.000 shares). That is, the company should finance the business with more debt and less owner contribution.
Required (round to nearest percent): 1. You have been asked to develop a comparison between

(a) the actual results and

(b) the results had the consultant's recommendation been followed. To do this, you decided to develop the following schedule:

Transcribed Image Text:

Income Statement Revenues Expenses Interest expense Pretax income Income tax (30%) Net income Balance Sheet Assets Liabilities (average interest rate, 10%) Common stock, par $10 Retained earnings $300,000 (198,000) (2,000) 100.000 (30,000) $ 70,000 $300.000 $ 20,000 200,000 80,000 $300.000