Question

1. New Madrid Corporation has sales of $2,000,000 in its first year of business. Over this year variable costs of goods sold were 20% of sales. Fixed cost of goods sold were $200,000. Selling and administrative cost were $400,000 and taxes were 30% of pretax income. Please calculate New Madrid Corporation’s after-tax income.

2. Please start with the data in the prior problem concerning New Madrid Corporation. In projecting the proforma second years income statement for New Madrid, assume that sales increase by 20% in the second year of operation, variable costs of goods sold stay at 20% of sales, fixed cost of sales increase by 10% over the second year, selling and administrative cost increase by 5% and taxes remain at 30% of pretax profit. Please calculate New Madrid Corporation’s projected after-tax income for the second year of operation.

3. Caruthersville Corporation begins the year with $800,000 in plant property and equipment. This equipment is depreciated by $40,000 over the coming year. Over this same year, Caruthersville purchases additional equipment worth $70,000. What is the ending balance of the plant property and equipment account at the end of the year?

4. Hamon Corporation is projecting its balance sheet and it arrives at the following numbers for the coming years. At the end of year one, total assets equal $8,000,000 while total liabilities and equity equal $9,500,000. At the end of year two, total assets equal $11,000,000 and total liabilities and equity equals 10,000,000. How much money will Hamon need to borrow money or have left over in years one and two?

Answer 1

1)

2 )      sales is increases by 20% , so sales of 2nd year    = 2000,000(1+20%)   = 2,400,000

        Fixed COGS   increases by 10% , so fixed COGS of 2nd year = 200,000(1+10%)   = 220,000

     selling& admin cost increases by 5 % , so selling& admin cost of 2nd year = 400,000(1+5%)   = 420,000

3)

4)

Year 1

Additional funds needed    = Total Liabilities -   Total Assets                  

                               = 9500000 - 8000000     

                         = $ 1,500,000.00           

                   

Year 2                

            Excess funds         = Total Assets - Total Liabilites                       

                        = 11000000   -   10000000  

                                           =   $ 1000,000.00