YOU MUST SHOW ALL CALCULATIONS TO EARN CREDIT 2016 2017 BALANCE SHEETS: Assets:
ID: 2614681 • Letter: Y
Question
YOU MUST SHOW ALL CALCULATIONS TO EARN CREDIT 2016 2017 BALANCE SHEETS: Assets: Cash Accounts Receivable 120,000 160,000 520,000 620,000 305,000 290,000 510.000 1,580,000 410.000 Total Assets 1,355,000 Liabilities and Equity: Accounts Payable Long-term Debt Common Stock 50,000 S375.000 500,000 625,000 50,000 75,000 455.000 Total Liabilities and Equity 355,000 1,580,000 INCOME STATEMENT: 3,500,000 Revenue Cost of Goods Sold General and Administrative 2,275,000 515,000 Expense 120.000 Earnings Before Interest and Taxes 590,000 40.000 550,000 Pretax Net Income Net Income 383,000 I. How much dividends did Gannon pay out to its shareholders in 2017? 2 What was Gannon's effective annual average tax rate in 2017? 3 If Gannon had 18,000 shares of common stock outstanding throughout 2017, what was its Earnings per Share (EPS) in 2017? 4 Assuming that Gannon didn't dispose of any of its fixed assets, how much new capital spending did it incur in 2017? s. What was Gannon's Operating Cash Flow (OCF) in 2017? 6 What was Gannon's investment in net working capital for 2017? 7 What was Gannon's Cash Flow to Creditors in 2017 & What was Gannon's Cash Flow to Stockholders in 2017?Explanation / Answer
1.
Retained earnings in the balance sheet of 2016 = 455,000
Retained earnings in the balance sheet of 2016 = 505,000
Hence, 50,000 must be transferred from current year's income to retained earnings.
Net income of 2017 = 383,000
Less: Retained earnings = 50,000
Hence, dividend paid during 2017 = 333,000
2.
Effective annual average tax rate = Income tax/Pre tax income
= 167,000/550,000
= 30.36%
3.
EPS = Net income/Number of outstanding shares
= 383,000/18,000
= 21.27
4.
Fixed assets increased from 410,000 to 510,000 in 2017. Hence, new capital spending in 2017 were 100,000.
5.
Operating cash flow = Net income + Depreciation + Inventory + Accounts payable - Accounts receivable
= 383,000 + 120,000 + 15,000 + 25,000 - 100,000
= 443,000
6.
Net working capital = Current assets - current liabilities
= 1,070,000 - 375,000
= 695,000
7.
Cash flow to creditors = Interest paid - new borrowings
= 40,000 - 125,000
= - 85,000
8.
Cash flow to stockholders = Dividend paid - New issue of equity
= 333,000 - 25,000
= 308,000
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