Refer to the information for Kepler Company below.

Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company's financial statements for the 2 most recent years.

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Kepler Company Comparative Balance Sheets This Year Last Year Current assets: Cash Accounts receivable, net Inventory Prepaid expenses S 50,000 300,000 600,000 25.000 S 975,000 125,000 S1,100,000 $100,000 150,000 400,000 30.000 680,000 150,000 $830,000 Total current assets Property and equipment, net Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Short-term notes payable 400,000 200,000 S 600,000 100,000 S 700,000 S290,000 60,000 350,000 150,000 500,000 Total current liabilities Long-term bonds payable, 12% Total liabilities Stockholders' equity Common stock (100,000 shares) Retained earnings 200,000 200,000 S1,100,000 200,000 130,000 $830,000 Total liabilities and stockholders' equity Kepler Ctompany Comparative Income Statements This Year Last Year Sales Less: Cost of goods sold S 950,000 (300-000) S 450,000 (275,000) S 175,000 $ 900,000 (490,000) S 410,000 Gross margin Less: Selling and administrative expenses Operating income S 150,000 This Year (12.000) S 163,000 Last Year (18,000) S 132,000 52.800) S 79,200 19.200) S 60,000 Less: Interest expense Income before taxes Net income Net income, retained Less: Income taxes S 97,800 (27.800) $ 70,000 Less: Dividends