Density Farms, Inc. had sales of $490,000, cost of goods sold of $180,000, selli

Question

Density Farms, Inc. had sales of $490,000, cost of goods sold of $180,000, selling and administrative expense of $68,000, and operating profit of $98,000. What was the value of depreciation expense?

$144,000

$153,000

$44,000

$142,000

#

$700,000

$128,963

$649,730

$652,230

#

A firm has $4,400,000 in its common stock account and $44,000,000 in its paid-in capital account. The firm issued 440,000 shares of common stock. What is the par value of the common stock?

$100 per share

$10 per share

$110 per share

$9 per share

#

Given the following, what is free cash flow?

$115,000.

$224,000.

$181,000.

$234,000.

#

Elgin Battery Manufacturers had sales of $930,000 in 2009 and their cost of goods sold represented 67 percent of sales. Selling and administrative expenses were 7 percent of sales. Depreciation expense was $8,000 and interest expense for the year was $13,000. The firm's tax rate is 26 percent. What is the dollar amount of taxes paid?

$57,408

$248,600

$221,842

$60,788

Gerry Co. has a gross profit of $990,000 and $290,000 in depreciation expense. Selling and administrative expense is $129,000. Given that the tax rate is 37 percent, compute the cash flow for Gerry Co.

Explanation / Answer

1.

Operating Profit= Sales – Cost of Goods sold-Depreciation- Selling and administrative expense

$98,000=$490,000-$180,000-depreciation-$68,000

$98,000=$490,000-$180,000-$68,000- depreciation

$98,000=$242,000- depreciation

Depreciation=$242,000-$98,000=$144,000

2. Free cash flow=

={[Gross Profit –Depreciaton-selling and administrative expense] x (1-tax rate]}+ Depreciation

=[$990,000-$290,000-$129,000] x (1-0.37) + $290,000

=[571,000] x 0.63 +290,000

=359,730 +290,000

=$649,730

3.Par Value =Value of Common stock/ no of common shares

=$4,400,000/440,000

=$10

4.Free cash flow to equity holders

Assumed dividend as preferred dividend

FCF= OCF= Capital Expenditure- Preferred dividend

=$191,000-$43,000-$33,000

=$115,000

5.

Tax paid = [ Sales –Cost of goods sold-sales and administrative expenses-depreciation- Interest expense] x tax rate

=[930,000-930,000 x 67% -930,000 x 7% -8,000-13,000] x 26%

=[930,000-623,100-65,100-8,000-13,000] x 26%

=[930,000-709,200] x 26%

=220,800 x 26%

=$57,408

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