Use the information in the table below to construct an income statement for 2015
ID: 2533680 • Letter: U
Question
Use the information in the table below to construct an income statement for 2015 and balance sheets for 2014 and 2015. Then, find Operating Cash Flow, change in Net Working Capital, Net Capital Spending, Cash Flow to Creditors, Cash Flow to Shareholders, and Free Cash Flow. The tax rate is 34% and the plowback ratio is 60%.
2014
2015
Sales
1700
Costs of Goods Sold
650
Depreciation Expense
200
Interest Expense
75
Total Fixed Assets
2200
3300
Accumulated Depreciation
400
Can be determined from the information provided
Total Current Assets
550
650
Total Current Liabilities
400
500
Long-term Debt
600
700
Common Stock
600
Can be determined from the information provided.
2014
2015
Sales
1700
Costs of Goods Sold
650
Depreciation Expense
200
Interest Expense
75
Total Fixed Assets
2200
3300
Accumulated Depreciation
400
Can be determined from the information provided
Total Current Assets
550
650
Total Current Liabilities
400
500
Long-term Debt
600
700
Common Stock
600
Can be determined from the information provided.
Explanation / Answer
2015 $ $ Sales 1,700.00 Less: Cost of goods sold (650.00) Gross income 1,050.00 Less: Depreciation expenses (200.00) Less: Interest expenses (75.00) Net income 775.00 Less: Tax @ 34% (263.50) Net income after tax 511.50 Add: Depreciation expenses 200.00 Operating cash flow 711.50 2,014.00 2,015.00 Current Assets 550.00 650.00 Less: Current Liabilities (400.00) (500.00) Net working capital 150.00 150.00 changes in net working capital ( $ 150 - $ 150 ) - Ending Fixed Assets for the year 2015 3,300.00 Less: Beginning Fixed Assets for the year 2015 (2,200.00) Add: Depreciation expenses 200.00 Net Capital Spending 1,300.00 Interest expenses 75.00 Beginning Long Term Debt for the year 2015 600.00 Less: Ending Long term Debt (700.00) Cash flow to creditors (25.00) Plowback ratio 0.60 Dividend Payout ratio ( 1 - 0.6 ) 0.40 Dividend paid ( $ 511.50 x 40% ) 204.60 Common Stock at the beginning 600.00 Add: Net income after tax 511.50 Less: Dividend paid (204.60) Common stock at the end 906.90 Cash flow to shareholders ( Dividend paid ) 204.60 Operating cash flow 711.50 Changes in working capital - Net Capital spending 1,300.00 Cash flow to creditors (25.00) Free Cash flow 1,986.50
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