Question

In: Finance

Use the following information for the remaining problems. First, construct an income statement and two balance...

Use the following information for the remaining problems.

First, construct an income statement and two balance sheets. Enter all answers as whole dollar numbers with no $ or commas (e.g. 20000). 2015 Sales = $60,000 2015 COGS = $25,000 2015 SG&A Expense = $10,000 2015 Depreciation Expense = $5,000 2015 Interest Expense = $3,000 Average Tax Rate = 30% Dividend Payout Ratio = 55% 2015 Current Assets = $24,000 and 2016 Current Assets = $27,000 2015 Net Working Capital = $5,000 Change in Net Working Capital = $1,000 2015 Total Fixed Assets = $100,000 2015 Accumulated Depreciation = $20,000 2015 Net Capital Spending = $12,000 2015 Long-term Debt = $40,000 2015 Common Stock = $22,000 2015 Cash Flow to Creditors = $1,000

What is the 2015 net income?

What is the 2015 Accumulated retained earnings?

What is 2016 Accumulated Retained Earnings?

What is 2015 Cash Flow to Shareholders?

What is the 2016 long term debt?

What is 2015 free cash flow?

Is there not enough information to answer the question.. That is my problem.

Solutions

Expert Solution

Answering 4 parts as per policy

Answer 1) The Net income is calculated as follows:

Answer : 8400

Answer 2)

In order to calculate retained earnings, the first step is to calculate the toal assets of 2015

Current Assets = 24,000

Fixed Assets = Total Fixed Assets - Accumulated Depreciation = 100,000 - 20,000 = 80,000

Depreciation Rate = 20,000 / 100,000 = 20%

Total Assets (Current Assets + Fixed Assets) = 104,000

Total Liabilities + Equity = Total Assets= 104,000

Long Term Debt = 40,000

Common Stock = 22,000

Current Liabilites (Current Assets - Net Working Capital) = 24,000 - 5000 = 19000

Retained Earnings (balancing figure) = (Total Liab + Equity) - LT Debt - Common Stock - Current Liab.

Retained Earnings (balancing figure) = 104,000 - 40,000 - 22,000 - 19,000

Retained Earnings (balancing figure) = 23000

Answer 3)

In order to calculate retained earnings, the first step is to calculate the toal assets of 2016

Current Assets = 27,000

Fixed Assets = Total Fixed Assets - Accumulated Depreciation(20% of Total Fixed Assets) = 112,000 - 22,400 = 89,600

Total FIxed Assets are increased by 12,000 due to capital spending.

Accumulated depreciation at 20% rate calculated in Answer 2)

Total Assets (Current Assets + Fixed Assets) = 27,000 + 89,600 = 116,600

Total Liabilities + Equity = Total Assets= 116,600

Long Term Debt = 40,000

Common Stock = 22,000

Capital Spending (liability) = 12,000

Current Liabilites (Current Assets - Net Working Capital) = 27,000 - 6000 = 21000

Retained Earnings (balancing figure) = (Total Liab + Equity) - LT Debt - Common Stock - Current Liab.- Capital Spending

Retained Earnings (balancing figure) = 116,600 - 40,000 - 22,000 - 21,000

Retained Earnings (balancing figure) = 21600

Answer 4)

Cash Flow to Share holders = Dividend Payments

Cash Flow to Share holders = 55% of Net Income

Cash Flow to Share holders = 55%*8400

Cash Flow to Share holders = 4620

jeff jeffy answered 2 years ago
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