Unit 4 quiz

Neiger Flours owes $16,929 in taxes on taxable income of $61,509. If the firm earns $100 more in income, it will owe an additional $48 in taxes. What is the average tax rate on income of $61,609?

27.56 percent Average tax rate = ($16,929 + 48)/$61,609 = .2756, or 27.56 percent

Roscoe's fixed assets were purchased three years ago for $1.8 million. These assets can be sold to Stewart's today for $1.2 million. Roscoe's current balance sheet shows net fixed assets of $960,000, current liabilities of $348,000, and net working capital of $121,000. If all the current assets were liquidated today, the company would receive $518,000 cash. The book value of the firm's assets today is _____ and the market value is ____.

$1,429,000; $1,718,000

Last year, The Pizza Joint added $6,230 to retained earnings from sales of $104,650. The company had costs of $87,300, dividends of $2,500, and interest paid of $1,620. Given a tax rate of 34 percent, what was the amount of the depreciation expense?

$2,503 Earnings before interest and taxes = [($6,230 + 2,500)/(1 -.34)] + $1,620 = $14,847 Depreciation = $104,650-87,300-14,847 = $2,503

AV Sales has net revenue of $513,000 and costs of $406,800. The depreciation expense is $43,800,interest paid is $11,200, and dividends for the year are$4,500. The tax rate is 33 percent. What is the addition to retained earnings?

$29,804 Addition to retained earnings = [($513,000 -406,800-43,800 -11,200)(1 -.33)] - $4,500 = Addition to retained earnings = $29,804

Pier Imports has cash of $41,100 and accounts receivable of $54,200, all of which is expected to be collected. The inventory cost $82,300 and can be sold today for $116,500. The fixed assets were purchased at a total cost of $234,500 of which $118,900 has been depreciated. The fixed assets can be sold today for $138,000. What is the total book value of the firm's assets?

$293,200

During the past year, Yard Services paid $36,800 in interest along with $2,000 in dividends. The company issued $3,000 of stock and $16,000 of new debt. The company reduced the balance due on its old debt by $18,400. What is the amount of the cash flow to creditors?

$39,200 Cash flow to creditors = $36,800 -16,000 + 18,400 = $39,200

Holly Farms has sales of $509,600, costs of $448,150, depreciation expense of $36,100, and interest paid of $12,400. The tax rate is 28 percent. How much net income did the firm earn for the period?

$9,324 Net income = ($509,600 -448,150 -36,100 -12,400)(1 -.28) = $9,324

The December 31, 2015, balance sheet of Maria's Tennis Shop, Inc., showed current assets of $1,105 and current liabilities of $915. The December 31, 2016, balance sheet showed current assets of $1,320 and current liabilities of $995.

135 ± 1% The change in net working capital is the end of period net working capital minus the beginning of period net working capital, so: Change in NWC = NWCend - NWCbeg Change in NWC = (CAend - CLend) - (CAbeg - CLbeg) Change in NWC = ($1,320 - 995) - ($1,105 - 915) Change in NWC = $135

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $4.6 million. The machinery can be sold to the Romulans today for $6.8 million. Klingon's current balance sheet shows net fixed assets of $3.4 million, current liabilities of $770,000, and net working capital of $136,000. If all the current accounts were liquidated today, the company would receive $885,000 cash.

Book value of total assets $ 4,306,000 ± .01% Sum $ 7,685,000 ± .01%

Pharrell, Inc., has sales of $585,000, costs of $273,000, depreciation expense of $71,000, interest expense of $38,000, and a tax rate of 35 percent. The firm paid out $36,000 in cash dividends and has 40,000 shares of common stock outstanding.

Earnings per share $ 3.30 ± 1% Dividends per share $ .90 ± .01 Earnings per share is the net income divided by the shares outstanding, so: EPS = Net income / Shares outstanding EPS = $131,950 / 40,000 EPS = $3.30 per share And dividends per share are the total dividends paid divided by the shares outstanding, so: DPS = Dividends / Shares outstanding DPS = $36,000 / 40,000 DPS = $.90 per share

Net working capital increases when:

inventory is sold at a profit

Given a profitable firm, depreciation:

lowers taxes.

The corporate tax structure in the U.S. is based on a:

modified flat-rate tax.

The market value:

of an asset tends to provide a better guide to the actual worth of that asset than does the book value.

Cash flow from assets is defined as:

operating cash flow minus the change in net working capital minus net capital spending.

Paid-in surplus is classified as:

owners' equity.

Net income increases when:

revenue increases.