15. Using Income Statements
Given the following information for Ted’s Dread Co. calculate the depreciation expense:
sales =$68,500; costs =$51,700; addition to retained earnings =$4,500; dividends
paid=$2,420; interest expense=$2,130; tax rate=21 percent.
Sales
$68,500
Costs
$51,700
Depreciation
x
Operating income
$16,800-x
Interest expense
$2,130
Taxable income
$14,670-x
Taxes (21%)
$3080.7-21%x
Net income
$11,589.3-79%x
Dividends
$2,420
Retained earning
$4,500
Net income= Dividends+ Retained earnings
$11,589.3-79%x=$2,420+$4,500
0.79x=$4,469.3
X=$5,911
Depreciation expense=$5,911
16. Preparing a Balance Sheet
Prepare a balance sheet for Alaskan Peach Corp. as of December 31,2019, based on the
following information: cash=$207,000; patents and copyrights =$871,000; accounts
payable =$293,000; accounts receivable =$265,000; tangible net fixed
assets=$5,270,000; inventory =$579,000; notes payable =$201,000; accumulated
retained earnings =$4,676,000; long-term debt =$1680,000.
Assets
Current assets
accounts receivable
inventory
Total
$207,000
$265,000
$579,000
$1,051,000
patents and copyrights
$871,000
Total
$1,922,000
Fixed assets
Net fixed assets
$5,270,000
Total assets
$7,192,000
Cash
Liabilities and Owners’ Equity
Current liabilities
Notes payable
$293,000
$201,000
Total
$494,000
Accounts payable
long-term debt
Total liabilities
Capital
Accumulated retained earnings
Total Owners’ Equity
Total liabilities and owners’ equity
$1,680,000
$2,174,000
$342
$4,676,000
$5,018,000
$7,192,000
21. Calculating Cash Flows
a. What is owners equity for 2018 and 2019?
Owners equity 2018 = Current assets 2018+ Net fixed assets2018- Current liabilities
2018- Long-term debt2018=$2,989+$13,862-$1,291-$7,161=$8,399
Owners equity 2019 = Current assets 2019+ Net fixed assets2019- Current liabilities
2019- Long-term debt2019= $3,169+$14,493-$1,898-$8,221=$7,543
b. What is the change in net working capital for 2019?
Change in net working capital 2019= (Current assets2019-Current liabilities 2019)(Current assets2018-Current liabilities 2018) = ($3,169-$1,898) -($2,989$1,291)=$1,271-$1,698=-$427
c In 2019, the company purchased $7876 in new fixed assets. How much
in fixed assets did the company sell? What is the cash flow from assets for the year?
(The tax rate is 22 percent.)
Fixed assets= (Fixed assets 2018-depreciation+ fixed assets purchased)-fixed assets
2019= ($13,862-$3,777+7876)-$14,493=$3,468
Taxes=(Sales-Costs-Depreciation-Interest
paid)*22%=($44,730-$22,432-$3,777$1,032)*22%=$3,847.58
OCF=Sales-Costs-Taxes=$44,730-$22,432-$3,847.58=$18,450.42
NCS= $14,493-$13,862+$3,777= $4,408
△ NWC=(Current assets2019-Current assets2018)-(Current liabilities2019-Current
liabilities2018)=($3,169-$2,989)-($1,898-$1,292)=-$427
CFFA=OCF-NCS-△NWC=$18,450.42-$4,408+$427=$14,469
d. During 2019, the company raised $2,371 in new long-term debt. How much longterm debt must the company have paid off during the year? What is the cash flow to
creditors?
Net new borrowing= $8,221-$7,161=$1060
CF/CR= Interest paid- Net new borrowing= $1,032-$1,060=-$28
CF/CR=$2,371-$8,221-$7,161=$1,311