Cost of goods sold Gross Profit Depreciation expense Operating profit Interest expense Earnings before taxes Earnings after taxes Take your calculations all the way to computing earnings per share. Income Statement Sales Gross profit Preferred stock dividends Earnings available to common stockholders.
Shares outstanding Earnings per share What was the value of depreciation expense? Set this problem up as a partial income statement, and determine depreciation expense as the plug figure. Solution: Precision Systems Sales Both the interest and principal of the loan were paid on December 31, Did Stein Books make a profit in ?
Please verify with an income statement presented in good form. Solution: Stein Books, Inc. Selling and administrative expenses were 12 percent of sales. Compute earnings after taxes. Assume the firm hires Ms. Carr, an efficiency expert, as a consultant. The extra sales effort will also reduce cost of goods sold to 66 percent of sales There will be a larger markup in prices as a result of more aggressive selling.
Compute revised earnings after taxes based on Ms. Will her ideas increase or decrease profitability? Continued b. Balance sheet LO3 Classify the following balance sheet items as current or noncurrent: Retained earnings Accounts payable Prepaid expenses Plant and equipment Inventory Common stock.
Bonds payable Accrued wages payable Accounts receivable Capital in excess of par Preferred stock Marketable securities. Solution: Retained earnings — noncurrent Accounts payable — current Prepaid expense — current Plant and equipment — noncurrent Inventory — current Common stock — noncurrent Bonds payable — noncurrent Accrued wages payable — current Accounts receivable — current Capital in excess of par — noncurrent 13 P a g e.
Balance sheet BS 5. Current liabilities CL 2. Income statement IS 6. Long-term liabilities LL 3. Current assets CA 7. Solution: 1. Balance Sheet BS 2. Income Statement IS 3. Current Assets CA 14 P a g e. Item Accounts receivable Retained earnings Income tax expense Accrued expenses Cash Selling and administrative expenses Plant and equipment Operating expenses Marketable securities Interest expense Sales Notes payable 6 months Bonds payable, maturity Common stock Depreciation expense Inventories Capital in excess of par value Net income earnings after taxes Income tax payable.
Development of balance sheet LO3 Arrange the following items in proper balance sheet presentation: Accumulated depreciation Solution: Assets Current Assets: Cash Marketable securities Accounts receivable Less: Allowance for bad debts Inventory Total Current Assets Other Assets: Investments Fixed Assets: 16 P a g e. Plant and equipment Less: Accumulated depreciation Net plant and equipment Total Assets Notes payable Total current liabilities Long-term Liabilities Bonds payable Total Liabilities Retained earnings The firm has 16, shares of common stock outstanding.
Calculate the earnings per share and the common dividends per share. What was the increase in retained earnings for the year? Okra Snack Delights, Inc.
Operating profit EBIT Earnings before taxes EBT Earnings after taxes EAT Preferred dividends Available to common stockholders Common dividends Increase in retained earnings How much did Quantum Technology earn during , and what would earnings per share be if 40, shares of common stock were outstanding?
Solution: Quantum Technology Retained earnings, December 31, Less: Retained earnings, December 31, Change in retained earnings Add: Common stock dividends Earnings available to common stockholders You might want to consult the textbook to explain this surprising result. Cash flow LO4 Identify whether each of the following items increases or decreases cash flow: Increase in accounts receivable Decrease in prepaid expenses Increase in notes payable Increase in inventory Depreciation expense Dividend payment Increase in investments Increase in accrued expenses Decrease in accounts payable.
Solution: Increase in accounts receivable — decreases cash flow use Increase in notes payable — increases cash flow source Depreciation expense — increases cash flow source Increase in investments — decreases cash flow use 20 P a g e. Decrease in accounts payable — decreases cash flow use Decrease in prepaid expense — increases cash flow source Increase in inventory — decreases cash flow use Dividend payment — decreases cash flow use Increase in accrued expenses — increases cash flow source Given that the tax rate is 40 percent, compute the cash flow for both companies.
Explain the difference in cash flow between the two firms. Selling and adm. Plus depreciation expense Cash Flow What does the concept of free cash flow represent? Solution: Coastal Pipeline, Inc. Cash flow from operations activities - Capital Expenditures - Common stock dividends - Preferred stock dividends Free cash flow. Free cash flow represents the funds that are available for special financial activities, such as a leveraged buyout. Compute book value net worth per share.
Fixed assets Total assets Net worth assigned to common What is the ratio of market value per share to book value per share? Solution: Rockford Corporation a.
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