Problem 9

Intro

Below is the balance sheet for Glucose Control Company as of Dec. 31, 2020. The company reported an annual net income of $85,000 for the following year, 2021, but did not change its assets or liabilities, unless otherwise noted.

Assets			Liabilities and Equity
Cash	11,000		Accounts payable	17,000
Marketable securities	2,000		Notes payable	6,000
Accounts receivable	6,000		Current liabilities	23,000
Inventory	34,000		Long-term debt	95,000
Current assets	53,000		Total liabilities	118,000
Machines	34,000		Paid-in capital	20,000
Real estate	80,000		Retained earnings	29,000
Fixed assets	114,000		Equity	49,000
Total assets	167,000		Total liab. & equity	167,000

Part 1

If the company distributed its entire net income as dividends, what would be the value of total equity on Dec. 31, 2021?

Part 2

If the company distributed half of its net income as dividends and used the rest to invest in new machines, what would be the value of total equity on Dec. 31, 2021?

Part 3

If the company didn't pay any dividends, but used the entire net income to pay back long-term debt, what would be the value of total equity on Dec. 31, 2021?

Part 4

If the company distributed half of its net income as dividends, used the rest to invest in new machines and sold all its marketable securities to pay back some long-term debt, what would be the value of total equity on Dec. 31, 2021?