The Bichette Company had the following transactions during the year ended December 31, 2000:
1. Sales on account were $155,000. Cash sales were $38,000.
2. Cost of goods sold during the year was $42,000.
3. Wages earned by employees were $32,000. Three-quarters of the amount was paid during the year as the wages were incurred. The remainder was accrued at year end.
4. A two-year insurance policy was purchased on January 1, 2000, for $4,800.
5. Equipment with a five-year life was acquired on June 30, 2000, for $10,000, with a note bearing interest at an annual rate of 9%. The interest and principal are not due until June 30, 2001.
6. Rent and other operating expenses paid in cash were $ 14,500.
7. The company sold a short-term investment and recorded a gain of $800
8. Dividends declared and paid were $24,015.
9. The income tax rate was 30%.

Required

a. Prepare a multi-step income statement similar to Exhibit 4-1 for the year ended December 31, 2000. Note: Make the necessary adjustments before preparing the income statement.
b. Assume that stockholders’ equity at the beginning of the year was $740,000. The only changes recorded in stockholders’ equity during 2000 were net income and dividends. Calculate return on equity and evaluate your results.
c. Calculate earnings per share. Assume that 140,000 shares were outstanding.
d. Calculate times interest earned.

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