Ch 2 Connect HW

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed $880,000 in the common stock account and $6.25 million in the additional paid-in surplus account. The 2018 balance sheet showed $915,000 and $8.5 million in the same two accounts, respectively. If the company paid out $640,000 in cash dividends during 2018, what was the cash flow to stockholders for the year?

Cash flow for shareholders = Dividends paid - Net new equity = 640,000 - [(915,000 + 8,500,000) - (880,000 + 6,250,000)] =640,000 - 2,285,000 = $-1,645,000

Griffin's Goat Farm, Inc., has sales of $624,000, costs of $385,000, depreciation expense of $51,000, interest expense of $22,000, and a tax rate of 24 percent. What is the net income for this firm?

Income before tax = sales -expense = 624,000-385,000-51,000-22,000= $166,000 Income after tax = Income before tax [1-tax] = 166,000(1-0.24) = $126,160

Griffin's Goat Farm, Inc., has sales of $674,000, costs of $265,000, depreciation expense of $38,000, interest expense of $26,000, and a tax rate of 23 percent. The firm paid out $101,000 in cash dividends, and has 35,000 shares of common stock outstanding. a) What is the earnings per share, or EPS, figure? b) What is the dividends per share figure?

Income before tax = sales -expense = 674,000-265,000-38,000-26,000= $345,000 Income after tax = Income before tax [1-tax] = 345,000(1-0.23) = 265,650 a) Earning per share =Net income /share outstanding = 265,650/35,000 =$7.59 b) Dividend per share=dividend /share outstanding = 101,000/35,000 = 2.885714286 = $2.89

For the past year, Galaxy Interiors had depreciation of $2,419, beginning total assets of $23,616, and ending total assets of $21,878. Current assets decreased by $1,356. What was the amount of net capital spending for the year?

Net capital spending = change in total assets during the year - change in current assets + depreciation Net capital spending = (ending total assets - beginning total assets) - change in current assets + depreciation Net capital spending = (21878 - 23616) - (-1356) + 2419 = $2,037

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed long-term debt of $3 million, and the 2018 balance sheet showed long-term debt of $3.5 million. The 2018 income statement showed an interest expense of $210,000. What was the firm's cash flow to creditors during 2018?

Net new debt=(3,500,000 - 3,000,000) =$500,000 Cash flow to creditors= Interest expense-Net new debt = 210,000 - 500,000 = -290,000

Which one of the following statements concerning net working capital is correct?

Net working capital may be a negative value

Which one of the following statements concerning corporate income taxes is correct for 2018?

The federal income tax on corporations is a flat-rate tax with the same rate applying to all levels of taxable income.

Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $6.1 million. The machinery can be sold to the Romulans today for $4.6 million. Klingon's current balance sheet shows net fixed assets of $3.7 million, current liabilities of $2.4 million, and net working capital of $500,000. If all the current assets and current liabilties were liquidated today, the company would receive $2.1 million cash. a) What is the book value of Klingon's total assets today? b) What is the sum of the market value of NWC and market value of fixed assets?

a) Current Assets = Current liabilities + Net Working Capital =2,400,000 + 500,000 = $2,900,000 Total Book Value = Net Fixed Assets + Current Assets =3,700,000 + 2,900,000 Total Book Value = $6,600,000 b) Total Market Value = Equipment Value + Current Assets = 4,600,000 + 2,100,000 Total Market Value = $6,700,000

The 2017 balance sheet of Dream, Inc., showed current assets of $1,310 and current liabilities of $900. The 2018 balance sheet showed current assets of $1,680 and current liabilities of $1,180. What was the company's 2018 change in net working capital, or NWC?

change in net working capital = ( net working capital in 2018)- ( net working capital in 2017) = (1,680 - 1,180) - (1,310 - 900) = $90

Wims, Inc., has current assets of $3,000, net fixed assets of $31,500, current liabilities of $2,500, and long-term debt of $7,200. a) What is the value of the shareholders' equity account for this firm? b) How much is net working capital?

a) Total Assets = Current Assets + Net Fixed Assets = 3,000 + 31,500 Total Assets = $34,500 Total Liabilities = Current Liabilities + Long-term Debt = 2,500 + 7,200 Total Liabilities = $9,700 Shareholders' Equity = Total Assets - Total Liabilities = $34,500 - $9,700 = $24,800 b) Net Working Capital = Total Current Assets - Total Current Liabilities = 3,000 - 2,500 = $500

A firm has net working capital of $560. Long-term debt is $3,970, total assets are $7,390, and fixed assets are $3,910. What is the amount of the total liabilities?

Current Assets = Total Assets- Fixed Assets = 7,390 - 3,910 Current Assets = $3,480 Current Liabilities = Current Assets - Working capital = 3,480 - 560 Current Liabilities = $2,920 Total Liabilities = Current Liabilities + Long term debt = 2,920 + 3,970 Total Liabilities = $6,890

Logano Driving School's 2017 balance sheet showed net fixed assets of $3.8 million, and the 2018 balance sheet showed net fixed assets of $6 million. The company's 2018 income statement showed a depreciation expense of $935,000. What was net capital spending for 2018?

Ending net fixed assets = Beginning net fixed assets + Net capital spending - Depreciation 6,000,000 = 3,800,000 + Net Capital Spending - 935,000 Net Capital Spending = 6,000,000-3,800,000 + 935,000 = $3,135,000

The 2017 balance sheet of Kerber's Tennis Shop, Inc., showed $2.4 million in long-term debt, $770,000 in the common stock account, and $6.05 million in the additional paid-in surplus account. The 2018 balance sheet showed $4.15 million, $975,000, and $8.55 million in the same three accounts, respectively. The 2018 income statement showed an interest expense of $320,000. The company paid out $660,000 in cash dividends during 2018. If the firm's net capital spending for 2018 was $780,000, and the firm reduced its net working capital investment by $185,000, what was the firm's 2018 operating cash flow, or OCF?

Net New Long-term Debt = Long-term Debt, 2018 - Long-term Debt, 2017 = 4,150,000 - 2,400,000 Net New Long-term Debt = $1,750,000 Cash Flow to Creditors = Interest Expense - Net New Long-term Debt = 320,000 - 1,750,000 Cash Flow to Creditors = $-1,430,000 Net New Equity = Common Stock, 2018 + Additional Paid-in Surplus, 2018 - Common Stock, 2017 - Additional Paid-in Surplus, 2017 = 975,000 + 8,550,000 - 770,000 - 6,050,000 Net New Equity = $2,705,000 Cash Flow to Stockholders = Dividends - Net New Equity = 660,000 - 2,705,000 Cash Flow to Stockholders = $-2,045,000 Cash Flow from Assets = Cash Flow to Creditors + Cash Flow to Stockholders = -1,430,000 + -2,045,000 Cash Flow from Assets = $-3,475,000 Cash Flow from Assets = Operating Cash Flow - Net Capital Spending - Net Increase in NWC: -3,475,000 = OCF - 780,000 - (-185,000) OCF = -3,475,000 + 780,000 + (-185,000) Operating Cash Flow = $-2,880,000

Jensen Enterprises paid $700 in dividends and $320 in interest this past year. Common stock remained constant at $6,800 and retained earnings decreased by $180. What is the net income for the year?

Net income = Dividends paid + Change in retained earnings = 700 + (-180) Net income = $520

RTF Oil has total sales of $911,400 and costs of $787,300. Depreciation is $52,600 and the tax rate is 21 percent. The firm is all-equity financed. What is the operating cash flow?

Operating cash flow=(Sales-Costs)(1-tax rate)+Tax Savings on Depreciation =(911,400 - 787,300)(1-0.21) + (0.21 x 52,600) = $109,085