1. The following balance sheet is for the Ballyhoo Company for fiscal year-end 2
ID: 2729981 • Letter: 1
Question
1. The following balance sheet is for the Ballyhoo Company for fiscal year-end 2014 (all numbers are in $thousands). Please fill in all missing data. (4 pts.) Assets Liabilities and Equity_____________ Cash _____ Accounts payable $420 Accounts receivable 960 Notes payable 580 Inventories 640 Accruals _____ Total curr. assets $2,800 Total current liabs. $1,750 Gross plant and equip. _____ Long-term bonds _____ Less: accum depr. 1,650 Total debt $2,680 Net plant and equip. _____ Preferred stock _____ Common stock (100 shares) 260 Retained earnings _____ Total Common Equity $2,430 Total Equity $2,520 Total Assets $5,200 Total liabs & equity _____
2. Using the information from above, if the fiscal year-end 2013 amounts for Accounts Receivable and Inventories were $895 and $650 respectively, and Accounts Payable and Accruals were $435 and $740 respectively, what was Ballyhoo’s cash from operating activities for 2014 assuming that net income and depreciation charges were $375 and $47 respectively? (5 pts.)
3. If Ballyhoo (again, from above) paid dividends totaling $120 in 2014, what would have been their retained earnings at the end of 2013? (2 pts.)
4. In 2013, the McFarsen Corp. reported sales of $4.56 million, operating expenses of $2.75 million, and depreciation was $0.88 million. The company pays an average rate of interest of 6.2% on $1.2 million of debt. It paid $130,000 in dividends to its shareholders in 2013. Construct an income statement for McFarsen for 2013. Use the tax table in table 2.3 (page 36) of the text to compute taxes. (6 pts.)
5. Using the information from problem #4 above, what is McFarsen’s Free Cash Flow for 2013 assuming that Gross Fixed Assets and Net Operating Working Capital were $2.4 million and 0.5 million, respectively, at the end of 2012, and $2.7 million and $0.4 million at the end of 2013. (3 pts.)
Explanation / Answer
1 Ballyhoo Company Balance sheet Year End 2014. Assets Amt $ Liabilities & Equities Amt $ Cash 1,200 Accounts Payable 420 Accounts Receivable 960 Notes payable 580 Inventory 640 Accruals 750 Total Current Assets 2,800 Total Current Laibilities 1,750 Gross Plant& Equipment 4,050 Long term bond 930 Less Accumulated depreciation (1,650) Total debt 2,680 Net Plant & Equipment 2,400 Preferred stock 90 Common stock (100shares) 260 Reatined Earning s 2,170 Total Common equity 2,430 Total Equity 2,520 Total Assets 5,200 Total Liab & Equities 5,200 2 Ballyhoo Company Cash flow from Operating Activities Details Amt $ Net Income 375 Add Depreciation 47 Less Increase in Accounts receivable (65) Add Decrease in Inventory 10 less decrease in Accounts Payable (15) Add Increase in accruals 10 Total Cash flow from Operating Activities 362 3 Reatined Earning Closing Balance in 2014 2,170 Less transfer for Income statement 2014 (375) Add dividend paid 2014 120 Reatained Earning balance at the end of 2013 1,915 4 McFerson Income Statement Amt $ Sales revenue 4,560,000 Less Operating Expenses 2,750,000 Less Depreciation 880,000 Interest Expense(@6.2% on $1.2M debt) 74,400 Taxable Income 855,600 Tax As per current rate ( marginal 34% ) 290,904 Net Income 564,696 5 Free Cash flow Net income 564,696 Add Depreciation 880,000 Cash flow from Operating Activities 1,444,696 Investment in Fixed Asset (300,000) Investment in Current Asset ( cash inflow) 100,000 Free Cash flow 2,689,392
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