Finance week 2

Week Two Problem Set

Reminder: Per the instructor’s policies, calculations (on how answers were derived) must be shown for

each of the problems (1-10) below. See Instructor Announcements for sample submission document

1) Your firm has the following balance sheet statement items: total liabilities of \$1,005,000; total assets of \$2,655,000; fixed and other assets of \$1,770,000; and long-term debt of \$200,000. What is the amount of the firm’s total stockholder’s equity?

A) \$3,650,885

B0 \$550,000

C) \$1,650,000

D) \$833,000

2) Delta Corp. reported the following items for the current year: Sales = \$3,000,000; Cost of Goods Sold = \$1,500,000; Depreciation Expense = \$170,000; Administrative Expenses = \$150,000; Interest Expense = \$30,000; Marketing Expenses = \$80,000; and Taxes = \$300,000. Delta Corp.’s gross profit is equal to

A) \$770,000.

B) \$1,070,000.

C) \$1,100,000.

D) \$1,500,000.

3) Delta Corp. reported the following items for the current year: Sales = \$3,000,000; Cost of Goods Sold = \$1,500,000; Depreciation Expense = \$170,000; Administrative Expenses = \$150,000; Interest Expense = \$30,000; Marketing Expenses = \$80,000; and Taxes = \$300,000. Delta Corp. operating income is equal to

A) \$770,000.

B) \$1,070,000.

C) \$1,100,000.

D) \$1,500,000.

4) Use the following information to calculate the company’s accounting net income for the year.

 Sales \$1,300,000 Operating Expenses \$900,000 Accounts Receivable \$1,300,000 Accounts Payable (Beg. of Year) \$150,000 Corporate Tax Rate 40%

A) \$300,000

B) \$240,000

C) \$125,000

D) \$120,000

5) Susannah Stores Inc. has sales of \$4,000,000; the firm’s cost of goods sold is \$2,500,000; and its total operating expenses are \$600,000. What is Susannah Stores Inc., EBIT?

A) \$850,000

B) \$875,000

C) \$900,000

D) \$1,300,000

6) Susannah Stores Inc. has sales of \$4,000,000; the firm’s cost of goods sold is \$2,500,000; and its total operating expenses are \$600,000. The firm’s interest expense is \$250,000, and the corporate tax rate is 40%. What is Susannah Stores Inc., net income?

A) \$288,000

B) \$350,000

C) \$377,000

D) \$390,000

7) Susannah Stores Inc. has sales of \$4,000,000; the firm’s cost of goods sold is \$2,500,000; and its total operating expenses are \$600,000. The firm’s interest expense is \$250,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of \$40,000, and the firm distributed \$60,000 in dividend payments to common stockholders. What is Susannah Stores Inc., “Addition to Retained Earnings” that would be reflected per the Retained Earnings Statement Balance?

A) \$650,000

B) \$390,000

C) \$330,000

D) \$290,000

8) Conglomerate, Inc. has total current assets of \$1,200,000; total current liabilities of \$500,000; and long-term assets of \$800,000. How much is the firm’s Total Liabilities & Equity?

A) \$2,500,000

B) \$1,300,000

C) \$2,000,000

D) \$1,800,000

9) Conglomerate, Inc. has sales of \$4,250,000; the firm’s cost of goods sold is \$2,500,000; and its total operating expenses are \$600,000. The firm’s interest expense is \$250,000, and the corporate tax rate is 40%. What is Conglomerate, Inc.’s tax liability?

A) \$258,000

B) \$260,000

C) \$360,000

D) \$600,000

10) Use the following information to answer the questions below. In 2004, Bobbalee, Inc. expects operating income (earnings before interest and taxes) of \$18,000,000. In addition, the corporation has \$20,000,000 of debt outstanding with a 10 percent interest rate and will pay \$1,000,000 in dividends to its common stockholders. Assume that Bobbalee will receive no other sources of income during 2004. Bobbalee’s s taxable income for 2004 will be:

A) \$18,000,000.

B) \$17,000,000.

C) \$16,000,000.

D) \$15,000,000.

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