The Davidson Corporations balance sheet and income statement are provi

QUESTION

The Davidson Corporations balance sheet and income statement are provided here.a. Construct the statement of stockholders equity for December 31, 2008.b. How much money has been reinvested in the firm over the years?c. At the present time, how large a check could be written without it bouncing?d. How much money must be paid to current creditors within the nextyear?
Since, we are given the balances and amounts for December 31, 2008 and not for December 31, 2007, we need to compute the figures for 2007 by reverse calculations, i.e. by adding dividends paid and deducting the net income figures from the retained earnings and the total stockholders equity amounts as on Dec. 31, 2008 to compute the figures for Dec. 31, 2007. a. Statement of stockholders equity as on December 31, 2008 Statement of stockholders equity (figures in millions) Common stock Retained earnings Total stockholders equity Shares Amount Balance as on December 31, 2007 100 $260 $1,374 $1,634 Add: Net income for 2008 $ 372 Less: Cash dividends $(146) Addition to retained earnings $ 226 Balance as on¦

mber 31, 2008 100 $260 $1,600 $1,860 b. By looking at the figure of retained earnings balance as on December 31, 2008 , $1,600 has been reinvested in the firm over the years. c. At the present time, Davidson Corporation can write a check for $15 (Cash and equivalents balance as on December 31, 2008), without bouncing the check. d. An amount of $620 is payable to current creditors within the next year. Accounts payable $120 Notes payable $220 Accruals $280 Total current liabilities $620

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