LR Enterprises Inc. had the following equity account balances at December 31, 2019:

Preferred shares, $1.75, non-cumulative, Authorized: 100,000 shares
Issued and outstanding: 45,000 shares ........................................... $ 675,000
Common shares, Authorized: Unlimited
Issued and outstanding: 800,000 shares ......................................... 1,320,000
Retained earnings .................................................................................. 645,000

Sales during 2020 totalled $1,560,000 and operating expenses were $998,000. Assume that income tax is accrued at year-end at the rate of 30% of annual operating profit. On March 1, 2020, 200,000 of the common shares were repurchased at $1.70 each and then cancelled. The board of directors declared and paid the annual cash dividend on the preferred shares on December 1 and an 8% common share dividend was declared and distributed on the same day when the market price per common share was $1.80.

Required

Preparation Component: Use the information provided to prepare:

1. An income statement for the year ended December 31, 2020, including appropriate earnings per share information.

2. A classified balance sheet at December 31, 2020, assuming the following adjusted account balances:
Cash, $168,000; Accounts Receivable, $102,000; Allowance for Doubtful Accounts, $3,500; Prepaid Insurance, $36,000; Land, $1,000,000; Building, $500,000; Accumulated Depreciation, Building, $241,000; Machinery, $1,909,600; Accumulated Depreciation, Machinery, $653,850; Furniture, $78,000; Accumulated Depreciation, Furniture, $44,000; Accounts Payable, $41,000; Notes Payable (due March 2022), $27,000.

Analysis Component:

3. What percentage of the assets is financed by debt?

4. What percentage of the assets is financed by equity?