Generally Accepted Accounting Principles and Company

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If a company earns net income of $25 million in Year 8, has 10 million shares of stock, pays a dividend of $1.00 per share, and has annual interest costs of $10 million, then | | |[pic]|[pic]|the company would have Year 8 earnings per share of $1.50. | | |[pic]| | |[pic]|[pic]|the company’s retained earnings for Year 8 would be $15 million (net income of $25 million less dividend payments of $10| | |[pic]|million); the $15 million in retained earnings is treated on the company’s balance sheet as additional accumulated | | | |retained earnings and thus additional equity investment by stockholders in Year 8. | |[pic]|[pic]|the company’s dividend payout for the year would equal 60% of earnings. | | |[pic]| | |[pic]|[pic]|the company’s retained earnings for the year would be $5 million; the $5 million in retained earnings would be shown on | | |[pic]|the company’s balance sheet as a reduction in equity investment by stockholders in Year 9. | |[pic]|[pic]|the company's retained earnings for the year would be $5 million (net income of $25 million less dividend payments of | | |[pic]|$10 million less interst costs of $10 million). |

|According to explanations provided on the Help screens for the Production Cost Report, if a company pays a PAT member a base wage of | |$18,000, a $60 quarterly bonus for perfect attendance, and annual fringe benefits of $2,500, if a PAT is paid a $1 incentive bonus | |per camera assembled, and if a PAT assembles 12,000 cameras per year (or 3000 cameras per quarter), then the annual compensation cost| |of a single PAT member and a fully-staffed PAT would be | |[pic]|[pic]|$18,000 and $54,000 | | |[pic]| | |[pic]|[pic]|$32,740 and $130,960 | | |[pic]| | |[pic]|[pic]|$23,740 and $94,960 | | |[pic]| | |[pic]|[pic]|$30,240 and $120,960 | | |[pic]| | |[pic]|[pic]|None of these | | |[pic]| |

Assume a company’s Income Statement for a given period has the following entries: |Income Statement Data |Quarter 1 | | |(in 000s) | |Sales Revenues |$50,000 | |Production Costs |26,500 | |Delivery Costs |1,600...
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