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Service Company’s balance sheets and income statement
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21. (20 points) G Service Company’s 2016 and 2017 balance sheets and 2017 income statement (excluding EPS) follow: 12-31-16 Cash Trade receivables, net Prepaid expenses Plant assets Accumulated depreciation Patents $900,000 600,000 100,000 2,900,000 (600,000) 240,000 $4,140,000 Accrued liabilities Unearned revenues Short-term debt Bonds payable Discount on bonds payable Asset retirement obligations Common stock ($1 par value) Additional paid-in-capital, common stock Treasury stock Retained earnings Sales Cost of services provided Operating expenses Other (gains)/losses, net Impairment loss on plant assets Interest expense Income before taxes Income tax expense Net income 109,953 250,000 150,000 300,000 (2,503) 82,270 50,000 1,450,000 (250,000) 2,000,280 $4,140,000 12-31-17 $1,820,000 760,000 250,000 3,500,000 (725,000) 200,000 $5,805,000 72,000 65,000 100,000 200,000 (6,173) 154,513 53,350 1,623,400 (150,000) 3,692,910 $5,805,000 $6,700,000 2,900,000 1,400,000 (3,458) 47,000 18,958 2,337,500 514,250 $1,823,250 Additional information for G follows: • During 2017, G declared and paid cash dividends. • On 06-30-17, G declared and distributed a 5% stock dividend on its outstanding common stock. At the time of declaration, one share of G’s stock traded for $48. • On 08-15-17, G issued, in exchange for cash, 600 shares of its common stock when G’s stock traded for $50 per share. At the time of the issuance, G incurred and paid $1,200 of stock issuance costs. • G is a publicly-traded company. On 12-01-17, G issued 500 shares of its common stock in exchange for a tract of land (PP&E). At the time of the issuance, the appraised value of the land was $40,000. • On 09-01-16, bought back 5,000 shares of its own common stock. This was G’s first treasury stock transaction. Also, during 2016, this was G’s only treasury stock transaction. On 12-31-17, G reissued 2,000 of its treasury shares at $48 per share. • During 2017, G sold a machine (PP&E) for $16,000. The machine had an original cost of $50,000. At the time of sale, the machine’s book value was $5,000. • During 2017, G spent $150,000 to increase the useful life of one of its fixed assets. • On 12-31-15, G acquired a fixed asset that will require G to spend an estimated $100,000 to dismantle the asset when G retires the asset on 12-31-20. At 12-31-15, the interest rate on US Treasury securities was 2% and G’s credit standing required a 3% risk premium. • On 01-01-17, G acquired a fixed asset that will require G to spend an estimated $80,000 to dismantle the asset when G retires the asset on 12-31-20. At 01-01-17, the interest rate on US Treasury securities was 1.5% and G’s credit standing required a 4% risk premium. • G has several patents, all of which have limited lives. During 2017, G did not enter into any transaction that would increase the balance in its patent account. 1 • • • • On 06-30-14, G issued $300,000 of its 5%, 5-year callable term bonds dated 06-30-14. The bonds pay interest every June 30 and December 31. When G issued the bonds, similar bonds paid 4.75%. On 06-30-14, G incurred and paid $8,000 of bond issuance costs. On 12-31-17, after making the semi-annual interest payment, G called in (retired) all the bonds at 102. On 12-31-17, G issued $200,000 of its 2%, 5-year term bonds dated 12-31-17. The bonds pay interest every December 31 and June 30. When G issued the bonds, similar bonds paid 2.5%. On 12-31-17, G incurred and paid $1,500 of bond issuance costs. G’s 2017 operating expenses includes depreciation, patent amortization, and ARO accretion expenses. G uses the indirect method. Prepare a statement of cash flows in good form. Be sure to label your answers as provided by OR used in. Do NOT worry about any supplemental disclosures. extra credit: determine the quarterly dividend per share amount that G paid during 2017. Assume (1) that the quarterly dividend per share amount did not change during the year and (2) that the ex-dividend dates were 03-15, 06-15, 09-15, and 12-15. Be sure to show in detail how you determined the quarterly dividend per share amount. The due date for this is also 03-12-19. 2 …
