Comparative Balance Sheet Testco Company

$20152014$

Assets

Current Assets:

Cash $ $100,000\mathrm{.}00$ $ $125,000\mathrm{.}00$

Marketable Securities $ $25,000\mathrm{.}00$ $ $30,000\mathrm{.}00$

Accounts Receivable, Net $ $700,000\mathrm{.}00$ $ $750,000\mathrm{.}00$

Inventory $ $25,000\mathrm{.}00$ $ $35,000\mathrm{.}00$

Prepaid Expenses $ $10,000\mathrm{.}00$ $ $1,000\mathrm{.}00$

Total Current Assets $ $860,000\mathrm{.}00$ $ $941,000\mathrm{.}00$

Plant and Equipment, Net $$2,176,000\mathrm{.}00$ $$1,850,000\mathrm{.}00$

Intellectual Property $ $50,000\mathrm{.}00$ $ $40,000\mathrm{.}00$

Total Assets $$3,086,000\mathrm{.}00$ $$2,831,000\mathrm{.}00$

Liabilities and Shareholder's Equity

Liabilities

Current Liabilities $ $750,000\mathrm{.}00$ $ $700,000\mathrm{.}00$

Bonds Payable, $10\%$ $ $500,000\mathrm{.}00$ $ $500,000\mathrm{.}00$

Total Liabilities $$1,250,000\mathrm{.}00$ $$1,200,000\mathrm{.}00$

Shareholder's Equity

Preferred Shares, $$5$ no par, $5000$ issued $ $200,000\mathrm{.}00$ $ $200,000\mathrm{.}00$

Common Shares, $50000$ no par $ $500,000\mathrm{.}00$ $ $500,000\mathrm{.}00$

Retained Earnings $$1,136,000\mathrm{.}00$ $ $931,000\mathrm{.}00$

Total Shareholders' Equity $$1,836,000\mathrm{.}00$ $$1,631,000\mathrm{.}00$

Total Liabilities and Shareholders' Equity $$3,086,000\mathrm{.}00$ $$2,831,000\mathrm{.}00$

Comparative Income Statement Testco Company

Sales $$8,000,000\mathrm{.}00$ $$7,500,000\mathrm{.}00$

Less Cost of Goods Sold $$6,500,000\mathrm{.}00$ $$5,800,000\mathrm{.}00$

Gross Margin $$1,500,000\mathrm{.}00$ $$1,700,000\mathrm{.}00$

Less Operating Expenses $ $900,000\mathrm{.}00$ $ $860,000\mathrm{.}00$

Net Operating Income $($EBIT$)$ $ $600,000\mathrm{.}00$ $ $840,000\mathrm{.}00$

Less Interest Expense $ $50,000\mathrm{.}00$ $ $50,000\mathrm{.}00$

Net Income Before Taxes $ $550,000\mathrm{.}00$ $ $790,000\mathrm{.}00$

Less Income Taxes $(40\%)$ $ $220,000\mathrm{.}00$ $ $316,000\mathrm{.}00$

Net Income $ $330,000\mathrm{.}00$ $ $474,000\mathrm{.}00$

Dividends Paid:

Preferred Dividends $ $25,000\mathrm{.}00$ $ $25,000\mathrm{.}00$

Common Dividends $ $100,000\mathrm{.}00$ $ $90,000\mathrm{.}00$

Total Dividends Paid $ $125,000\mathrm{.}00$ $ $115,000\mathrm{.}00$

Net Income Retained $ $205,000\mathrm{.}00$ $ $359,000\mathrm{.}00$

Retained Earnings, Beginning of Year $ $931,000\mathrm{.}00$ $ $572,000\mathrm{.}00$

Retained Earnings, End of Year $$1,136,000\mathrm{.}00$ $ $931,000\mathrm{.}00$

Note the following extra information:

Assume all sales are on account

Accounts Receivable at the beginning of $2014$ was $$775000$

Inventory at the Beginning of $2014$ was $$45000$

Total Assets at the Beginning of $2014$ was$$2700000$

Preferred Equity at the Beginning of $2014$ was $$200000$

Total Shareholders' Equity at the Beginning of $2014$ was $$1500000$

Market Price per Share for $2015$ is $$19$ and $2014$ is $$20$

The dividends per common share was $$2\mathrm{.}00$ in $2015$ and $$1\mathrm{.}80$ in $2014$

There has been no changes in the number of shares issued over the last $3$ years

Analyze the previous data and determine the Net Operating Income.

Question $32$ options:

A$)$

$$67000$

B$)$

$$68000$

C$)$

$$43000$

D$)$

$$55000$