1. Building a balance Sheet Culligan, Inc., hascurrent assets of $5,300, net fix
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Question
1. Building a balance Sheet Culligan, Inc., hascurrent assets of $5,300, net fixed assets of $26,000, currentliabilities of $3,900, and long-term debt of $14,200. What is thevalue of the shareholders’ equity account for this firm? Howmuch is het working capital?
2. Building an Income Statement Ragsdale, Inc.,has sales of $493,000. Costs of $210,000, depreciation expense of$35,000, interest expense of $19,000, and a tax rate of 35percent.
a. What is the net income for the firm?
b. Suppose the company paid out $50,000 in cashdividends. What is the addition to retained earnings?
3. Calculating Operating Cash Flow Ranney,Inc., has sales of $14,900, costs of $5,800, depreciation expenseof $1,300, and interest expense of $780. If the tax rate is 40percent, what is the operating cash flow, or OCF?
4 . Building an Income Statement During theyear, the Senbet Discount Tire Company had gross sales of $1.2million. The firm’s cost of goods sold and selling expenseswere $450,000 and $225,000, respectively. Senbet also had notespayable of $900,000. These notes carried an interest rate of 9percent. Depreciation was $110,000. Senbet’s tax rate was 35percent.
a. What was Senbet’s net income?
b. What was Senbet’s operating cashflow?
Explanation / Answer
1. To find owners’equity, we must construct a balance sheet as follows:
Balance Sheet
CA $5,300 CL $3,900
NFA 26,000 LTD 14,200
OE ??
TA $31,300 TL & OE $31,300
We know that totalliabilities and owners’ equity (TL & OE) must equal totalassets of $31,300. We also know that TL & OE is equal tocurrent liabilities plus long-term debt plus owner’s equity,so owner’s equity is:
OE = $31,300–14,200 – 3,900 = $13,200
NWC = CA – CL =$5,300 – 3,900 = $1,400
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