7. South Sea Baubles, Inc. has the following highlights from its balance sheet a
ID: 2735470 • Letter: 7
Question
7. South Sea Baubles, Inc. has the following highlights from its balance sheet and income statements for FY 2013 and 2014. Balance Sheet as of End of Fiscal Year (Figures in Millions of USD) 2013 2014 Assets Cash & Mkt. Securities 40 65 Other Current Assets 50 75 Net Fixed Assets 800 900 Liabilities Current Liabilities 50 60 Long-Term Debt 600 700 Income Statement for Fiscal Year 2014 (Figures in Millions of USD) Revenue 1,950 Cost of Goods Sold 1,030 Depreciation 350 Interest Expense 240 a) What was the magnitude of SSB’s shareholder’s equity in 2013 and 2014? b) What was SSB’s net working capital for these two years? c) What were the taxes paid by SSB in 2014 if the company was in the 35% tax bracket?
Explanation / Answer
SOLUTION :
BALANCE SHEET
2013
2014
ASSETS
CASH
40
65
OTHER CA
50
75
TOTAL CURRENT ASSETS
90
140
NET FIXED ASSETS
800
900
TOTAL ASSETS
890
1040
LIABILITIES
CURRNET LIABILITIES
50
60
LONG TERM DEBT
600
700
EQUITY (BALANCING FIGURE)
240
280
TOTAL EQUITY & LIABILITY
890
1040
INCOME STATEMENT
2014
REVENUE
1950
COGS
-1030
GP
920
DEPRECIATION
-350
INTERST EXPENSE
-240
NET INCOME
330
2013
2014
a.SHARE HOLDER EQUITY =TOTAL ASSET - CURRNT LIABILITIES - LONG TERM DEBT
240
280
890-50-600
1040-60-700
b.NET WORKING CAPITAL
2013
2014
CURRENT ASSETS - CURRENT LIABILITIES
40
80
90-50
140-60
c.TAX PAID IN 2014 = NET INCOME*35%
115.5
(330*35%)
BALANCE SHEET
2013
2014
ASSETS
CASH
40
65
OTHER CA
50
75
TOTAL CURRENT ASSETS
90
140
NET FIXED ASSETS
800
900
TOTAL ASSETS
890
1040
LIABILITIES
CURRNET LIABILITIES
50
60
LONG TERM DEBT
600
700
EQUITY (BALANCING FIGURE)
240
280
TOTAL EQUITY & LIABILITY
890
1040
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