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what is the company rsquo s dividend policy i e what proportion of the company rsquo 636875

Prepare an income statement, balance sheet, and statement of changes in owners’ equity; analyze results The following information was obtained from the records of Shae, Inc.:

Merchandise   inventory

$264,000

Notes   payable (long term)

300,000

Sales

900,000

Buildings   and equipment

504,000

Selling,   general, and administrative expenses

72,000

Accounts   receivable

120,000

Common   stock (42,000 shares)

210,000

Income   tax expense

84,000

Cash

192,000

Retained   earnings, 1/1/10

129,000

Accrued   liabilities

18,000

Cost of   goods sold

540,000

Accumulated   depreciation

216,000

Interest   expense

48,000

Accounts   payable

90,000

Dividends   declared and paid during 2010

39,000

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.

Required:

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 Shae, Inc.

Based on the financial statements that you have prepared for part a, answer the questions in parts b–e. Provide brief explanations for each of your answers and state any assumptions you believe are necessary to ensure that your answers are correct.

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 is used for dividends)?

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