Titan Football Manufacturing had the following operating results for 2010: sales

Question

Titan Football Manufacturing had the following operating results for 2010: sales - $21,000; cost of goods sold$12,795; depreciation expense $3,500; interest expense-$625; dividends paid = $350. At the beginning of the year, net fixed assets were $15,800, current assets were $2,980, and current liabilities were $2,030. At the end of the year, net fixed assets were $18,740, current assets were $3,360, and current liabilities were $2,120. The tax rate for 2010 was 35 percent. Without any new debt issued, the amount of the net new equity raised is estimated to be_during 2010

Explanation / Answer

Net new equity raised = ending onwers equity - beginning owners equity

beginning owners equity = total assets - total liabilities

beginnning of the year total assets = current assets + net fixed assets = $2,980 + $15,800 = $18,780

end of the year total assets =$3,360 + $18,740 = $22,100

beginning of the year equity = $18,780 - current liabilities = $18,780 - $2030 = $16,750

end of the year equity = $22,100 - $2,120 = $19,980

retained earnings in 2010

sales ; $21,000

cost of goods sold : $12,795

gross profit : $8205

depreciation expense: $3500

EBIT : $4705

Interest expense : $625

EBT : $4080

less tax expense: $1428

net income : $2652

dividends paid : $350

addition to retained earnings : $2302

so end of year equity - beggining of year equity = $3230

retained earnings = $2302

so net new equity raised = $928

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