The Davidson Corporation\'s balance sheet and income statement are given below:

Question

The Davidson Corporation's balance sheet and income statement are given below:

Davidson Corporation: Balance Sheet as of December 31, 2008 (Millions of Dollars)
ASSETS LIABILITIES AND EQUITY
Cash and equivalents $20 Accounts payable $120
Accounts receivable 495 Notes payable 215
Inventories 880 Accruals 310
Total current assets $1,395 Total current liabilities $645
Net plant and equipment 2,490 Long-term bonds 1,480
Total debt $2,125
Common stock (100 million shares) 260
Retained earnings 1,500
Common equity $1,760
Total assets $3,885 Total liabilities and equity $3,885

Davidson Corporation: Income Statement for Year Ending December 31, 2008 (Millions of Dollars)

Sales $6,500
Operating costs excluding depreciation and amortization 4,745
EBITDA $1,755
Depreciation and amortization 130
EBIT $1,625
Less: Interest 255
EBT $1,370
Taxes (40%) 548
Net income $822
Common dividends paid $324.69
Earnings per share $8.22

a. Construct the Statement of Retained Earnings for December 31, 2008. Round your answer to two decimal places.
Balance of Retained Earnings, December 31, 2007 ________million
Add: Net income, 2008 _________million
Less: Dividends paid to common stockholders _________million
Balance of Retained Earnings, December 31, 2008 _________million

b. How much money has been reinvested in the firm over the years? Round your answer to the nearest hundredth of million, if necessary.
________million

c. At the present time, how large a check could be written without it bouncing? Round your answer to the nearest hundredth of million, if necessary.
________million

d. How much money must be paid to current creditors within the next year? Round your answer to the nearest hundredth of million, if necessary.
________million

Explanation / Answer

1) Opening Retained Earning 1002.69 add : Net income 822 less : dividend paid 324.69 Balance 2008 - 1500 b) 822 - 324.69 = 497.31 c) 20 million d) 120 millions

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