What interest rate is charged on long-term debt

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Reference no: EM13891159

Prepare an income statement, balance sheet, and statement of changes in stockholders' equity; analyze results The information on the following page was obtained from the records of Breanna, Inc.:

Accounts receivable

$ 10,000

Accumulated depreciation

52,000

Cost of goods sold

128,000

Income tax expense

8,000

Cash

65,000

Sales

200,000

Equipment

120,000

Selling, general, and administrative expenses

34,000

Common stock (9,000 shares)

90,000

Accounts payable

15,000

Retained earnings, 1/1/13

23,000

Interest expense

6,000

Merchandise inventory

37,000

Long-term debt

40,000

Dividends declared and paid during 2013

12,000

Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2013, and that all income statement items reflect activities that occurred during the year ended December 31, 2013. There were no changes in paid-in capital during the year.

Required:

a. Prepare an income statement and statement of changes in stockholders' equity for the year ended December 31, 2013, and a balance sheet at December 31, 2013, for Breanna, Inc.

Based on the financial statements that you have prepared for part a, answer the questions in parts b-e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.

b. What is the company's average income tax rate?

c. What interest rate is charged on long-term debt?

d. What is the par value per share of common stock?

e. What is the company's dividend policy (i.e., what proportion of the company's earnings are used for dividends)?

Reference no: EM13891159

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