You are planning to analyse Zamil Company's December 31, Yecar 6, balance sheet. The following information is available: 1) Beginning and ending balances are identical for both accounts receivable and inventory. 2) Net income is $1,300. 3) Times interest earned is 5 (income taxes are zero). Company has 5% bonds outstanding and issued at par. 4) Net profit margin is 10%. Gross profit margin is 30%. Inventory turnover is 5. 5) Days' sales in receivables is 72 days. 6) Sales to end-of-year working capital is 4. Current ratio is 1.5. 7) Acid-test ratio is 1.0 (excludes prepaid expenses). 8) Plant and equipment (net) is $6,000. It is one-third depreciated. 9) Dividends paid on 8% nonparticipating preferred stock are $40. There is no change in common shares outstanding during Year 6. Preferred shares were issued two years ago at par. 10) Earnings per common share are $3.75. 11) Common stock has a $5 par value and was issued at par. 12) Retained carnings at January 1, Year 6, are $350. Required: a) Given the information available, prepare this company's income statement and balance sheet as of December 31, Ycar 6 (include the following account classifications: cash, accounts receivable, inventory, prepaid expenses, plant and equipment (net), current liabilities, bonds payable, and stockholders' equity). b) Determine the amount of dividends paid on common stock in Year 6.

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Chapter1: Financial Statements And Business Decisions
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Question# 5
You are planning to analyse Zamil Company's December 31, Year 6, balance sheet. The following
information is available:
1) Beginning and ending balances are identical for both accounts receivable and inventory.
2) Net income is $1,300.
3) Times interest earned is 5 (income taxes are zero). Company has 5% bonds outstanding and
issued at par.
4) Net profit margin is 10%. Gross profit margin is 30%. Inventory turnover is 5.
5) Days' sales in receivables is 72 days.
6) Sales to end-of-year working capital is 4. Current ratio is 1.5.
7) Acid-test ratio is 1.0 (excludes prepaid expenses).
8) Plant and equipment (net) is $6,000. It is one-third depreciated.
9) Dividends paid on 8% nonparticipating preferred stock are $40. There is no change in common
shares outstanding during Year 6. Preferred shares were issued two years ago at par.
10) Earnings per common share are $3.75.
11) Common stock has a $5 par value and was issued at par.
12) Retained earnings at January 1, Year 6, are $350.
Required:
a) Given the information available, prepare this company's income statement and balance sheet
as of Dcccmber 31, Ycar 6 (include the following account classifications: cash, accounts
receivable, inventory, prepaid expenses, plant and equipment (net), current liabilities, bonds
payable, and stockholders' equity).
b) Determine the amount of dividends paid on common stock in Year 6.
Transcribed Image Text:Question# 5 You are planning to analyse Zamil Company's December 31, Year 6, balance sheet. The following information is available: 1) Beginning and ending balances are identical for both accounts receivable and inventory. 2) Net income is $1,300. 3) Times interest earned is 5 (income taxes are zero). Company has 5% bonds outstanding and issued at par. 4) Net profit margin is 10%. Gross profit margin is 30%. Inventory turnover is 5. 5) Days' sales in receivables is 72 days. 6) Sales to end-of-year working capital is 4. Current ratio is 1.5. 7) Acid-test ratio is 1.0 (excludes prepaid expenses). 8) Plant and equipment (net) is $6,000. It is one-third depreciated. 9) Dividends paid on 8% nonparticipating preferred stock are $40. There is no change in common shares outstanding during Year 6. Preferred shares were issued two years ago at par. 10) Earnings per common share are $3.75. 11) Common stock has a $5 par value and was issued at par. 12) Retained earnings at January 1, Year 6, are $350. Required: a) Given the information available, prepare this company's income statement and balance sheet as of Dcccmber 31, Ycar 6 (include the following account classifications: cash, accounts receivable, inventory, prepaid expenses, plant and equipment (net), current liabilities, bonds payable, and stockholders' equity). b) Determine the amount of dividends paid on common stock in Year 6.
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