During the year, Belyk Paving Co. had sales of $2,390,000. Cost of goods sold, administrative and...

During the year, Belyk Paving Co. had sales of $2,390,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,435,000, $436,000, and $491,000, respectively. In addition, the company had an interest expense of $216,000 and a tax rate of 30 percent (ignore any tax loss carryback or carryforward provisions.). The company paid out $393,000 in cash dividends. Assume that net capital spending was zero, no new investments were made in net working capital, and no new stock was issued during the year.

Calculate the firm's net new long-term debt added during the year. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Expert Solution


Net new debt added during the year = Net Capital spending - Investment in net working capital - Increase (Decrease) in retained earnings
Net Capital spending = $0
Investment in net working capital = $0

Increase (Decrease) in retained earnings
Sales	$2,390,000.00
Less : Cost of goods sold	$1,435,000.00
Gross Margin	$955,000.00
Less : Administrative and selling expenses	$436,000.00
Less : Depreciation Expense	$491,000.00
Operating Profit	$28,000.00
Less : Interest Expense	$216,000.00
Profit before Tax	-$188,000.00
Less : Tax	$0.00
Net Income (loss)	-$188,000.00
Less : Dividend Paid	$393,000.00
Increase (Decrease) in retained earnings	-$581,000.00

Net new debt added during the year = $0 - $0 - (-$581000)
Net new debt added during the year = $5,81,000

jeff jeffy answered 1 year ago

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