Question
In: Finance
Use the following information for ABC Inc. the answer the following questions (the applicable tax rate...
Use the following information for ABC Inc. the answer the following questions (the applicable tax rate is 34%):
|
2017 |
2018 |
|
|
Sales |
23,146,000 |
25,872,000 |
|
Depreciation |
3,322,000 |
3,472,000 |
|
Cost of Goods Sold |
7,958,000 |
9,414,000 |
|
Other Expenses |
1,892,000 |
1,648,000 |
|
Interest |
1,552,000 |
1,852,000 |
|
Cash |
12,134,000 |
12,932,000 |
|
Accounts Receivable |
16,068,000 |
18,854,000 |
|
Short-term Notes Payable |
3,422,000 |
2,294,000 |
|
Long-term Debt |
40,640,000 |
49,392,000 |
|
Net Fixed Assets |
101,776,000 |
108,546,000 |
|
Accounts Payable |
8,768,000 |
9,288,000 |
|
Inventory |
28,566,000 |
30,576,000 |
|
Dividends |
2,822,000 |
3,236,000 |
- Draw up a statement of comprehensive income and statement of financial position for this company for 2017 and 2018.
- Prepare the cash flow statement.
- For 2018, calculate the cash flow from assets, cash flow to creditors, and cash flow to shareholders.
Solutions
Expert Solution
| a) | STATEMENT OF COMPREHENSIVE INCOME | ||
| 2017 | 2018 | ||
| Sales | $ 2,31,46,000 | $ 2,58,72,000 | |
| Cost of goods sold | $ 79,58,000 | $ 94,14,000 | |
| Gross profit | $ 1,51,88,000 | $ 1,64,58,000 | |
| Operating expenses: | |||
| Depreciation | $ 33,22,000 | $ 34,72,000 | |
| Other expenses | $ 18,92,000 | $ 16,48,000 | |
| Total operating expenses | $ 52,14,000 | $ 51,20,000 | |
| Operating profit | $ 99,74,000 | $ 1,13,38,000 | |
| Interest expense | $ 15,52,000 | $ 18,52,000 | |
| Income before taxes | $ 84,22,000 | $ 94,86,000 | |
| Tax at 34% | $ 28,63,480 | $ 32,25,240 | |
| Net income | $ 55,58,520 | $ 62,60,760 | |
| Dividends | $ 28,22,000 | $ 32,36,000 | |
| Addtion to retained earnings | $ 27,36,520 | $ 30,24,760 | |
| STATEMENT OF FINANCIAL POSITION | |||
| Assets | |||
| Current assets: | |||
| Cash | $ 1,21,34,000 | $ 1,29,32,000 | |
| Accounts receivable | $ 1,60,68,000 | $ 1,88,54,000 | |
| Inventory | $ 2,85,66,000 | $ 3,05,76,000 | |
| Total current assets | $ 5,67,68,000 | $ 6,23,62,000 | |
| Net fixed assets | $ 10,17,76,000 | $ 10,85,46,000 | |
| Total assets | $ 15,85,44,000 | $ 17,09,08,000 | |
| Total liabilities and stockholders' equity | |||
| Current liabilities: | |||
| Accounts payable | $ 87,68,000 | $ 92,88,000 | |
| Short term notes payable | $ 34,22,000 | $ 22,94,000 | |
| Total current liabilities | $ 1,21,90,000 | $ 1,15,82,000 | |
| Long term debt | $ 4,06,40,000 | $ 4,93,92,000 | |
| Total liabilities | $ 5,28,30,000 | $ 6,09,74,000 | |
| Stockholders' equity [Plug in figure] | $ 10,57,14,000 | $ 10,99,34,000 | |
| [158544000-52830000] | [170908000-60974000] | ||
| Total liabilities and stockholders' equity | $ 15,85,44,000 | $ 17,09,08,000 | |
| b) | STATEMENT OF CASH FLOWS-2018 | ||
| Cash flow from operating activities: | |||
| Net income | $ 62,60,760 | ||
| Adjustements to reconcile net income with cash flow from operating activities: | |||
| Depreciation | $ 34,72,000 | ||
| Increase in accounts receivable | $ -27,86,000 | ||
| Increase in inventory | $ -20,10,000 | ||
| Increase in accounts payable | $ 5,20,000 | $ -8,04,000 | |
| Net cash from operating activities | $ 54,56,760 | ||
| Cash flow from investing activities: | |||
| Increase in fixed assets (108546000-101776000+3472000) | $ -1,02,42,000 | ||
| Net cash used by investing activities | $ -1,02,42,000 | ||
| Cash flow from financing activities: | |||
| Payment of dividends | $ -32,36,000 | ||
| Issue of common stock [109934000-105714000-3024760] | $ 11,95,240 | ||
| Payment of ST notes payable | $ -11,28,000 | ||
| Raising of long term debt | $ 87,52,000 | ||
| Net cash from financing activities | $ 55,83,240 | ||
| Increase in cash | $ 7,98,000 | ||
| Beginning balance of cash | $ 1,21,34,000 | ||
| Ending balance of cash | $ 1,29,32,000 | ||
| c) | Cash flow from assets = OCF-Net capital spending-Change in NWC | ||
| OCF = EBIT+Depreciation-taxes = 11338000+3472000-3225240 = | $ 1,15,84,760 | ||
| Net capital spending = 108546000-101776000+3472000 = | $ 1,02,42,000 | ||
| Change in NWC = (62362000-11582000)-(56768000-12190000) = | $ 62,02,000 | ||
| Cash flow from assets | $ -48,59,240 | ||
| Cash flow to creditors = Interest expense+Beginning long term debt-Ending long term debt = 1852000+40640000-49392000 = | $ -69,00,000 | ||
| Cash flow to stock holders = Dividend-New equity = 3236000-1195240 = | $ 20,40,760 | ||
| Cash flow to creditors and stockholders | $ -48,59,240 | ||
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2005 2004
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Accounts
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Inventories
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Prepaid
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Investments 100,000 75,000
Plant
assets 210,000 250,000
Accumulated depreciation
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Liabilities and Stockholders' Equity
Accounts
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Interest payable
20,000 5,000
Income tax
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Note
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Common
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Investments 100,000 75,000
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Interest payable
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Income Statement
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31
2005 2004
Assets
Cash $ 20,000 $ 10,000
Accounts
receivable 160,000 110,000
Inventories 80,000 50,000
Prepaid
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Investments 100,000 75,000
Plant
assets 210,000 250,000
Accumulated
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Liabilities and Stockholders' Equity
Accounts
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Interest
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Income tax
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Common
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Retained
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Cost of goods
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Gross
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Operating expenses (including Depreciation
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Interest
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Income tax
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