?????? ? ?? ?? ?? ??1 1. Testing of Key Concepts and Skills about Financial Stat

Question

?????? ? ?? ?? ?? ??1 1. Testing of Key Concepts and Skills about Financial Statements (34s) (1) Culligan, Inc., has current assets of $6,000, net fixed assets of $45,000, current liabilities of $3,000, and long-term debt of $23,000. What is the value of the sharcholders' equity account for this firm? How much is net working capital? (8s) (2) Ragsdale, Inc, has sales of S600,000, costs of $350,000, depreciation expense of $40,000, interest expense of $20,000, and a tax rate of 25 percent. What is the net income for the firm? Suppose the company paid out $50,000 in cash dividends. What is the addition to retained earnings? (8s) (3) Klingon Cruisers, Inc., purchased new cloaking machinery three years ago for $8 million. The machinery can be sold to the Romulans today for $4 Smillion. Klingon's current balance sheet net fixed assets of $4,500,000, current liabilities of $2,800,000, and net working capital of $950,000. If all the current assets were liquidated today, the company would roceive $2.8 million cash. What is the book value of Klingon's assets today? What is the market value? (8) (4) The following table presents the long-term liabilities and stockholders 'equity of Information Control Corp, one year ago: Long-term debt $50,000,000 Preferred stock 15,000,000 Common stock ($1 par value) 20,000,000 Capital surplus 45,000,000 Accumulated retained eanings 89,000,000 During the past year, Information Control issued 8 million shares of new stock at a sotal price of $25 million, and issued $5 million in new long-term debt. The company generated $10 million in net income and paid S6 million in dividends. Construct the current balance sheet reflecting the changes that occurred at Information Control Corp. during the year. (10s) ?1?

Explanation / Answer

1. Total assets = current assets + fixed assets = $51,000

Total liabilities = current liability + long term debt + sharehlder's equity = $51,000

Or, $3,000 + $23,000 + shareholdr's equity = $51,000

Or, shareholder's equity = $51,000 - $26,000 = $25,000

Net working capital = CA - CL = 6,000 - 3,000 = $3,000

2.

A cash dividend of $50,000 will reduce the profit to $92,500 which will be the addition to retained earnings.

3. Book value of current liabilites = $2,800,000

Net WC = $950,000

Book value of current assets = $2,800,000 + $950,000 = $3,750,000

4.

Particulars Amount ($) Sales 600,000 Cost 350,000 Depreciation 40,000 PBIT 210,000 Interest 20,000 PBT 190,000 - Tax @ 25% 47,500 PAT 142,500

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