Arbor Corporations financial statements for 2014 showed the following: Notice in these data that the company had

Arbor Corporation’s financial statements for 2014 showed the following:

Notice in these data that the company had a debt of only $40,000 compared with common stock outstanding of $230,000. A consultant recommended the following: debt, $90,000 (at 9 percent) and common stock outstanding of $180,000 (18,000 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 develop the following schedule:

2. Based on the completed schedule in requirement (1), provide a comparative analysis and interpretation of the actual results and the consultant’srecommendation.

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Income Statement Revenues Expenses Interest expense Pretax income Income tax (30%) Net income $300,000 (196,000) 3,600) 100,400 (30,120) 70,280 Balance Sheet Assets Liabilities (average interest rate, 9%) Common stock, par $10 Retained earnings $360,000 $40,000 230,000 90,000 $360.000 Actual Results for 2014 Results with an Increase in Debt and Reduction in Equity Item a. Total debt b. Total assets c. Total stockholders' equity d. Interest expense (total at 9 percent) e. Net income f Return on total assets g. Earnings available to stockholders (1) Amount (2) Per share (3) Return on stockholders' equity