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Answered: - E3-1 You are a summer intern at the office of a local tax


E3-1 You are a summer intern at the office of a local tax preparer. To test your basic knowledge of financial statements, your manager, who graduated from your alma mater 2 years ago, gives you the following list of accounts and asks you to prepare a simple income statement using those accounts.

Accounts ($000,000)

Depreciation 25 General and administrative expenses 22 Sales 345 Sales expenses 18 Cost of goods sold 255 Lease expense 4 Interest expense 3

a) Arrange the accounts into a well-labeled income statement. Make sure you label and solve for gross profit, operating profit, and net profit before taxes. b. Using a 35% tax rate, calculate taxes paid and net profit after taxes. c. Assuming a dividend of $1.10 per share with 4.25 million shares outstanding, calculate EPS and additions to retained earnings.

E3-2 Explain why the income statement can also be called a "profit-and-loss statement." What exactly does the word balance mean in the title of the balance sheet? Why do we balance the two halves?

E3-3 Cooper Industries, Inc., began 2012 with retained earnings of $25.32 million. During the year it paid four quarterly dividends of $0.35 per share to 2.75 million common stockholders. Preferred stockholders, holding 500,000 shares, were paid two semiannual

E4-2 Classify the following changes in each of the accounts as either an inflow or an outflow of cash. During the year (a) marketable securities increased, (b) land and buildings decreased, (c) accounts payable increased, (d) vehicles decreased, (e) accounts receivable increased, and (f) dividends were paid.

E4-3 Determine the operating cash flow (OCF) for Kleczka, Inc., based on the following data. (All values are in thousands of dollars.) During the year the firm had sales of $2,500, cost of goods sold totaled $1,800, operating expenses totaled $300, and depreciation expenses were $200. The firm is in the 35% tax bracket.

E4-4 During the year, Xero, Inc., experienced an increase in net fixed assets of $300,000 and had depreciation of $200,000. It also experienced an increase in current assets of $150,000 and an increase in accounts payable and accruals of $75,000. If operating cash flow (OCF) for the year was $700,000, calculate the firm's free cash flow (FCF) for the year.



 


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