During 2009, Raines Umbrella Corp. had sales of $734,000. Cost of goods sold, ad

Question

During 2009, Raines Umbrella Corp. had sales of $734,000. Cost of goods sold, administrative and selling expenses, and depreciation expenses were $573,000, $94,000, and $131,000, respectively. In addition, the company had an interest expense of $95,000 and a tax rate of 30 percent. (Ignore any tax loss carryback or carryforward provisions.) Assume Raines Umbrella Corp. paid out $16,000 in cash dividends. If spending on net fixed assets and net working capital was zero, and if no new stock was issued during the year, what is the firm's net new long-term debt? $0 $44,000 $83,000 $67,450 $18,500

Explanation / Answer

Sale          734,000 Cost of goods sold       (573,000) Administrative and selling overhead          (94,000) Deprecation       (131,000) Net profit          (64,000) Tax                     -   Profit after tax          (64,000) add Non cash expense          131,000 Cash Profit            67,000 Less Dividend          (16,000) Cash profit after paying dividend            51,000 Since the firm is having sufficient cash to meet all its regualr liabilities so there wont be any equirement of long term liabilities. So option a is correct.

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