Dividends

Keener Company has had 800 shares of 8%, $100 par preferred stock and 44,000 shares of $5 stated value common stock outstanding for the last 3 years. During that period, dividends paid totaled $5,400, $31,000, and $35,400 for each year, respectively.

Required:

Compute the amount of dividends that Keener must have paid to preferred shareholders and common shareholders in each of the 3 years, given the following 3 independent assumptions:
If an amount is zero, enter "0".

1. Preferred stock is nonparticipating and noncumulative.

2. Preferred stock is nonparticipating and cumulative.

3. Preferred stock is fully participating and cumulative.

Pro Forma Income Statement (Version 1) Ranger Company Assumptions: Revenues for the first year of operation are projected to be $2,500,000. These revenues are expected to increase by 7% each year thereafter. The Cost of Goods sold is estimated to be 54% of the revenue figure per year. Operating Expenses for the first year include the following: Administrative Costs: $50,000 Rent: $150,000 Repairs/Maintenance: $75,000 Utility Expenses: $24,000 Wage Expense: $468,000 After the first year, all of the operating expenses are expected to increase by 4% annually Depreciation expense is fixed for the entire five-year projected operating period at $100,000 per year. Other income includes Interest Income totaling $5,000 per year for all five years. Other expenses include inventory loss estimated at 1% of revenues. The company will have a $2,000,000 loan to help finance its operations. This loan is an interest-only loan (no principal will be paid for the entire five-year operating projection period). The loan carries an annual interest rate of 8.00%. This loan will represent the only source of interest expense for the company. Tax expense is estimated at 28% of taxable income. Year 1 Year 2 Year 3 Year 4 Year 5

Total Revenues $2,500,000.00

COGS 1,350,000.00

Gross Profit

Operating Expenses

Administrative Costs $50,000.00

Rent 150,000.00

Repairs/Maintenance 75,000.00

Utility Expenses 24,000.00

Wage Expense 468,000.00

Total Operating Expenses $767,000.00

EBITDA

Depreciation Expense 100,000.00

NOI

Interest Income

Inventory Loss

Total Other Income/Loss

EBIT

Interest Expense

EBT Tax Expense

Net Income

Free Cash Flow (prepare for year 3)

A corporation was formed January 1, Year 1 when the firm issued 10,000 shares of its $25 par value common stock for $350,000. On the same date the firm issued 1,000 shares of its 10% preferred shares for $100,000. The preferred shares have a par value of $100 per share. The preferred shares are cumulative and participating. The coporation had Net Income in Year 1 of $250,000. The firm declared and paid no dividends of any sort in Year 1. In Year 2, the firm had Net Income of $300,000. On December 31, Year 2, the firm declared and paid a $100,000 cash dividend. On January 1, Year 3, the firm declared and distributed a 15% common stock dividend when the fair market value was $50 per share. In Year 3, the firm’s Net Income was $500,000. On January 1, Year 4, the firm declared and distributed a 50% common stock dividend when the fair market value per share was $60. On December 31, Year 4, the firm declared and paid a cash dividend of $200,000. The firm's Net Income for Year 4 was $400,000.

How much money would the common shareholders receive from the cash dividend declared and paid on December 31, Year 2?

Considering both the common stock dividend in Year 3 and the firm's Net Income for Year 3, what is the net change in the firm's Retained Earnings account during Year 3?

How much cash would be given to the preferred shareholders out of the cash dividend declared and paid on December 31, Year 4?

(for reference, the textbook answers are 1. $64286 2. $425,000 and 3. $45745... I just need help with the work)

Case - Apple is planning to launch a new easy-to-use kitchen appliance with a touchscreen interface, the iToaster. Apple expects to sell 1 million and 2 million units in the first two years after launch, respectively, and then to discontinue this product. Each unit will sell for $200 in the first year after launch, and $150 in the second year. The costs of components and labor are $40 per unit, while salaries and other expenses add up to $10 million in each year the product is sold. The factory that manufactures the iToaster requires an investment of $60 million right now and $30 million one year from now. It will take one year to complete, so production will only start in the second year, i.e. at the end of year 2 followed by one more year of production in at the end of year 3. The factory will be depreciated linearly to zero over 5 years after its completion.

To get production up and running, Apple has to buy components worth $5 million immediately before the launch of the product, and add another $2 million worth of components to its inventory exactly one year later. The firm's marginal tax rate is 34%.

a. What is the annual depreciation (in $ million)?

b. What is the net operating profit after taxes in year 2 (in $ million)?

c. What is the net operating profit after taxes in year 3 (in $ million)?

d. What is the free cash flow (FCF) at the end of year 0 (in $ million)?

e. What is the free cash flow (FCF) at the end of year 1 (in $ million)?

f. What is the free cash flow (FCF) at the end of year 2 (in $ million)?

Entries for Bonds Payable, including bond redemption

The following transactions were completed by Montague Inc., whose fiscal year is the calendar year:

Year 1
July 1. Issued $55,000,000 of 10-year, 9% callable bonds dated July 1, Year 1, at a market (effective) rate of 7%, receiving cash of $62,817,040. Interest is payable semiannually on December 31 and June 30.
Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined
with the semiannual interest payment.
31. Closed the interest expense account.
Year 2
June 30. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined
with the semiannual interest payment..
Dec. 31. Paid the semiannual interest on the bonds. The bond discount amortization of $390,852 is combined with the semiannual interest payment.
31. Closed the interest expense account.
Year 3
June 30. Recorded the redemption of the bonds, which were called at 103. The balance in the bond premium
account is $6,253,632 after payment of interest and amortization of premium have been recorded.
(Record the redemption only.)

1. Journalize the entries to record the foregoing transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. When required, round amounts to the nearest dollar.

Year 1 July1


Dec.31


Dec.31

Year 2 June 30


Dec.31


Dec.31

Year 3 June 30

2. Indicate the amount of the interest expense in (A) Year 1 and (B) Year 2.

a. Year 1 $
b. Year 2 $

3. Determine the carrying amount of the bonds as of December 31, Year 2.
$

Apple is planning to launch a new easy-to-use kitchen appliance with a touchscreen interface, the iToaster. Apple expects to sell 1 million and 2 million units in the first two years after launch, respectively, and then to discontinue this product. Each unit will sell for $200 in the first year after launch, and $150 in the second year. The costs of components and labor are $80 per unit, while salaries and other expenses add up to $10 million in each year the product is sold.

The factory that manufactures the iToaster requires an investment of $90 million right now and $45 million one year from now. It will take one year to complete, so production will only start in the second year, i.e. at the end of year 2 followed by one more year of production in at the end of year 3. The factory will be depreciated linearly to zero over 5 years after its completion.

To get production up and running, Apple has to buy components worth $5 million immediately before the launch of the product, and add another $2 million worth of components to its inventory exactly one year later.

The firm's marginal tax rate is 34%.

1. What is the annual depreciation (in $ million)?
2. What is the net operating profit after taxes in year 2 (in $ million)?
3. What is the net operating profit after taxes in year 3 (in $ million)?
4. What is the free cash flow (FCF) at the end of year 0 (in $ million)?
5. What is the free cash flow (FCF) at the end of year 1 (in $ million)?
6. What is the free cash flow (FCF) at the end of year 2 (in $ million)?

You are the Management Accountant of a chair manufacturing business. The business is running for 3 years. You have used marginal cost approach and FIFO (First in First Out) to value the stock in the financial statements. You are interested to know what the recorded profits would have been if absorption costing had been used instead. Using the following information, prepare a statement for each of the three years comparing both methods:

(a) Total fixed indirect production cost is £64,000 per year.

(b) Direct labour costs over each of the three years were £16 per unit.

(c) Direct material costs over each of the three years were £12 per unit.

(d) Variable expenses which vary in direct ratio to production were £20 per unit.

(e) Sales were: Year 1: 36,000 units; Year 2: 40,000 units; Year 3: 60,000 units. The selling price remained constant at £70 per unit.

(f) Production is at the rate of: Year 1: 40,000 units; Year 2: 48,000 units; Year 3: 51,000 units.

(g) Other overheads are as follows:

• Selling and Distribution overheads are: Year 1: £10,000 for each year; Year 2: £10,500, Year 3: £11,000
• Administrative overheads £15,000 for each year

(h) Interest expense: Year 1: £1,000; Year 2: £1,250; Year 3: £1,500

Required:

Prepare the income statements using marginal and absorption costs for the three years (6 income statements in total) with calculations / workings of closing stock and comment on the results.

What is the IRR of the following set of cash flows?

Year 0 Cash Flow –$10,741

Year 1 Cash Flow $5,900

Year 2 Cash Flow $4,300

Year 3 Cash Flow $6,100

Upper Division of Lower Company acquired an asset with a cost of $560,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows.

The cost of the asset is expected to increase at a rate of 20 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes.

Required:

a. What is the ROI for each year of the asset's life, using a historical cost approach?

b. What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year?