During the year, Belyk Paving Co. had sales of $2,385,000. Cost of goods sold, a

Question

During the year, Belyk Paving Co. had sales of $2,385,000. Cost of goods sold, administrative and selling expenses, and depreciation expense were $1,440,000, $436,500, and $491,500, respectively. In addition, the company had an interest expense of $216,500 and a tax rate of 30 percent (ignore any tax loss carryback or carryforward provisions.). Belyk Paving Co. paid out $378,000 in cash dividends. Assume that no new investments were made in net fixed assets or net working capital, and no new stock was issued during the year.

Required:
Calculate the firm's new long-term debt added during the year. (Do not include the dollar sign ($).)

Long-term debt $

Explanation / Answer

net sales = 2385000 expenses = 1440000+436500+491500 =2368000 interest expense = 216500 tax rate = 30% dividends = 378000 income before tax = -199500 = 2385000 - 1440000-436500-491500 no tax ..-ve profits net income after cash dividends paid = -577500 so debt increases by $577500

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