The following information was obtained from the records of Breanna, Inc.
Merchandise inventory $ 33,000
Notes payable (long-term) 50,000
Buildings and equipment 84,000
Selling, general, and administrative expenses 12,000
Accounts receivable 20,000
Common stock (7,000 shares) 35,000
Income tax expense 14,000
Retained earnings, 1/1/10 21,500
Accrued liabilities 3,000
Cost of goods sold 101,000
Accumulated depreciation 36,000
Interest expense 8,400
Accounts payable 15,400
Dividends declared and paid during 2010 6,900
Except as otherwise indicated, assume that all balance sheet items reflect account balances at December 31, 2010, and that all income statement items reflect activities that occurred during the year ended December 31, 2010. There were no changes in paid-in capital during the year.
(a) Prepare an income statement and statement of changes in owners’ equity for the year ended December 31, 2010, and a balance sheet at December 31, 2010, for Breanna, Inc. Based on the financial statements that you have prepared for part a, answer the questions in parts b–e.
(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)?