Exam 2: Reviewing Financial Statements

The following is the 2013 income statement for Lamps, Inc.                         Lamps, Inc           Income Statement for Year Ending December 31, 2013                     (in millions of dollars) Net sales \ 100 Less: Cost of goods sold Gross profits 20 Less: Depreciation 5 Earnings before interest and taxes (EBIT) 15 Less: Interest 2 Earnings before taxes (EBT) 13 Less: Taxes 5 Net Income \ 8 The CEO of Lamps wants the company to earn a net income of $12 million in 2014. Cost of goods sold is expected to be 75 percent of net sales, depreciation expense is not expected to change, interest expense is expected to increase to $4 million, and the firm's tax rate will be 40 percent. What is the net sales needed to produce net income of $12 million?

Which of the following statements is correct?

In 2014, Usher Sports Shop had cash flows from investing activities of ($2,150,000) and cash flows from financing activities of ($3,219,000). The balance in the firm's cash account was $980,000 at the beginning of 2014 and $1,025,000 at the end of the year. Calculate Usher Sports Shop's cash flow from operations for 2014.

Glo's Glasses balance sheet lists net fixed assets as $20 million. The fixed assets could currently be sold for $25 million. Glo's current balance sheet shows current liabilities of $7 million and net working capital of $3 million. If all the current accounts were liquidated today, the company would receive $9 million cash after paying $7 million in liabilities. What is the book value of Glo's assets today? What is the market value of these assets?

You have been given the following information for Nicole's Neckties Corp.: Net sales = $2,500,000; Cost of goods sold = $1,300,000; Addition to retained earnings = $30,000; Dividends paid to preferred and common stockholders = $300,000; Interest expense = $50,000.The firm's tax rate is 40 percent. What is the depreciation expense for Nicole's Neckties Corp.?

Crispy Corporation has net cash flow from financing activities for the last year of $20 million. The company paid $5 million in dividends last year. During the year, the change in notes payable on the balance sheet was an increase of $2 million, and change in common and preferred stock was an increase of $3 million. The end of year balance for long-term debt was $45 million. What was their beginning of year balance for long-term debt?

Lemmon Inc. lists fixed assets of $100 on its balance sheet. The firm's fixed assets have recently been appraised at $140. The firm's balance sheet also lists current assets at $15. Current assets were appraised at $16.50. Current liabilities book and market values stand at $12 and the firm's long-term debt is $40. Calculate the market value of the firm's stockholders' equity.

Catering Corp. reported free cash flows for 2013 of $8 million and investment in operating capital of $2 million. Catering listed $1 million in depreciation expense and $2 million in taxes on its 2008 income statement. What was Catering's 2013 EBIT?

Harvey's Hamburger Stand has total assets of $3 million of which $1 million are current assets. Cash makes up 20 percent of the current assets and accounts receivable makes up another 5 percent of current assets. Harvey's gross plant and equipment has a book value of $1.5 million and other long-term assets have a book value of $1 million. Using this information, what is the balance of inventory and the balance of depreciation on Harvey's Hamburger Stand's balance sheet?

Brenda's Bar and Grill has total assets of $17 million of which $5 million are current assets. Cash makes up 12 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Brenda's gross plant and equipment has a cost value of $12 million and other long-term assets have a cost value of $1,000,000. Using this information, what are the balance of inventory and the balance of depreciation on Brenda's Bar and Grill's balance sheet?

Soccer Starz, Inc. started the year with a balance of retained earnings of $25 million and ended the year with retained earnings of $32 million. The company paid dividends of $2 million to the preferred stock holders and $6 million to common stock holders. What was Soccer Starz's net income for the year?

You have been given the following information for Sherry's Sandwich Corp.: Net sales = $300,000; Gross profit = $100,000; Addition to retained earnings = $30,000; Dividends paid to preferred and common stockholders = $8,500; Depreciation expense = $25,000.The firm's tax rate is 30 percent. What are the cost of goods sold and the interest expense for Sherry's Sandwich Corp.?

Jack and Jill Corporation's year-end 2013 balance sheet lists current assets of $250,000, fixed assets of $800,000, current liabilities of $195,000, and long-term debt of $300,000. What is Jack and Jill's total stockholders' equity?

Rupert's Rims balance sheet lists net fixed assets as $15 million. The fixed assets could currently be sold for $17 million. Rupert's current balance sheet shows current liabilities of $5 million and net working capital of $3 million. If all the current accounts were liquidated today, the company would receive $6 million cash after paying $5 million in liabilities. What is the book value of Rupert's assets today? What is the market value of these assets?

Bike and Hike, Inc. started the year with a balance of retained earnings of $100 million and ended the year with retained earnings of $128 million. The company paid dividends of $9 million to the preferred stock holders and $22 million to common stock holders. What was Bike and Hike's net income for the year?

Deferred taxes occur when a company postpones taxes on profits pertaining to:

Oakdale Fashions Inc. had $255,000 in 2013 taxable income. If the firm paid $82,100 in taxes, what is the firm's average tax rate?

LLV Inc. originally forecasted the following financial data for next year: sales = $1,000, cost of goods sold = $710, and interest expense = $95. The firm believes that COGS will always be 71 percent of sales. Due to pressure from shareholders, the firm wants to achieve a net income of $150. Assuming the interest expense will remain the same, how large must sales be to achieve this goal? Assume a 35 percent tax rate.

The Sasnak Corporation had a 2013 taxable income of $4,450,000 from operations after all operating costs but before: (1) interest charges of $750,000, (2) dividends received of $900,000, (3) dividends paid of $500,000, and (4) income taxes.Using the tax schedule in Table 2.3, what is Sasnak's income tax liability? What are Sasnak's average and marginal tax rates on taxable income from operations?

School Books, Inc. has total assets of $18 million of which $6 million are current assets. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. School Books' gross plant and equipment has an original cost of $13 million and other long-term assets have a cost value of $2 million. Using this information, what are the balance of inventory and the balance of depreciation on School Books' balance sheet?