HOMEWORK - Fall 2009 – Solutions6. (3 points) O Corporation's capital structure consists of 600,000 shares of common stock. At December 31, 2007 an analysis of the accounts revealed the following information:Accounts receivable, Allowance for doubtful accounts, Interest payable on money borrowed, InventoryThese account balances are ignored because they are balance sheet accounts, not income statement accounts.O CorporationIncome StatementFor the Year Ended December 31, 2007Sales$9,200,000Cost of goods sold2,800,000Gross profit6,400,000Selling, general and administrative expenses3,100,000Income from operations3,300,000Dividend income on stock investments250,000Interest expense320,000Income before income taxes and extraordinary item3,230,000Income taxes1,130,500Income before extraordinary item2,099,500Earthquake-related gain, net of applicable income taxes of $420,000780,000Net income$2,879,500O CorporationStatement of Retained EarningsFor the Year Ended December 31, 2007Retained earnings, January 1, 2007$12,000,000Net income2,879,500Dividends declared100,000Retained earnings, December 31, 2007$14,779,5007.(3 points) Presented below is information relating to the J Company for the year ended 12-31-06.
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