For December 31, 20X1, the balance sheet of Baxter Corporationwas as follows: Current Assets Liabilities Cash $ 20,000 Accountspayable $ 22,000 Accounts receivable 25,000 Notes payable 30,000Inventory 35,000 Bonds payable 60,000 Prepaid expenses 13,000 FixedAssets Stockholdersâ Equity Gross plant and equipment $ 260,000Preferred stock $ 30,000 Less: Accumulated depreciation 52,000Common stock 65,000 Paid in Capital 35,000 Net plant and equipment$ 208,000 Retained earnings 59,000 Total assets $ 301,000 Totalliabilities and stockholdersâ equity $ 301,000 Sales for 20X2 were$270,000, and the cost of goods sold was 60 percent of sales.Selling and administrative expense was $27,000. Depreciationexpense was 8 percent of plant and equipment (gross) at thebeginning of the year. Interest expense for the notes payable was10 percent, while the interest rate on the bonds payable was 12percent. This interest expense is based on December 31, 20X1balances. The tax rate averaged 20 percent. $3,000 in preferredstock dividends were paid, and $5,400 in dividends were paid tocommon stockholders. There were 10,000 shares of common stockoutstanding. During 20X2, the cash balance and prepaid expensesbalances were unchanged. Accounts receivable and inventoryincreased by 10 percent. A new machine was purchased on December31, 20X2, at a cost of $45,000. Accounts payable increased by 30percent. Notes payable increased by $7,000 and bonds payabledecreased by $15,000, both at the end of the year. The preferredstock, common stock, and capital paid in excess of par accounts didnot change.
a. Prepare an income statement for 20X2. (Round EPS answer to 2decimal places.)
b. Prepare a statement of retained earnings for20X2.
c. Prepare a balance sheet as of December 31,20X2. (Amounts to be deducted should be indicated withparentheses or a minus sign.)
