Today is April 1 and Dale has just received the annual report of Clam Chowder Company, in which he owns stock. Displayed below are the comparative balance sheet and income statement that have drawn his attention.

After reviewing this information, Dale makes the following comments.
1. I'm surprised that the value of the company's land has not increased. Prices have been increasing rapidly in the area the company is located.
2. I'm sure that I received a dividend from this company, but they don't report that they paid any.
3. I don't see how the company's cash balance could have declined when it took in $485,000 in cash from sales to customers.
4. I see that the value of the buildings and equipment declined by $2,822. That seems about right.
5. I don't understand why the company's highly trained workforce is not listed as an asset. It is one of the most important resources that the company has.
6. One thing I really like about this company is the up-to-the-minute financial reports it provides.
7. It's good to see that the value of the inventory has increased since last year.

Required
A. Help Dale better understand these financial statements by responding to each of his comments. Explain whether you agree or disagree with each comment and why.
B. Did the company declare and pay cash dividends during the year just ended? If so, what total amount was distributed?
C. Approximately how many shares of stock does the company haveoutstanding?

Transcribed Image Text:

Dec. 31, Dec. 31, For Year Balance Sheet 2005 2004 Income Statement 2005 Cash Accounts receivable Inventory Buildings and equipment Accumulated depreciation Land $1,244 1,512 Sales revenue $485,000 300,700 184,300 6,914 5,886 Cost of goods sold 11,211 49,900 46,500 Operating expenses: (5,319) (2497 Advertising 22,000 22,000 Depreciation 9,099 Gross profit 31,330 2,822 19,200 113,698 17,250 Total assets $85,950 $82,500 Utilities 2,313 Wages 1988 Operating income Accounts payable Interest payable Wages payable 796, 10-year note payable Contributed capital Retained capital 0 2,563 Interest expense 7,364 6,327 Pretax income 20,000 42,300 42300 Net income 13,973 14,850 $ 9,650 3.86 20,000 Income tax expense Total liabilities and equity $85,950 $82,500 Earnings per share