Finance week 2

Week Two Problem Set

Reminder: Per the instructor’s policies, calculations (on how answers were derived) must be shown for

each of the problems (1-10) below. See Instructor Announcements for sample submission document

1) Your firm has the following balance sheet statement items: total liabilities of $1,005,000; total assets of $2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000. What is the amount of the firm’s total stockholder’s equity?

A) $3,650,885

B0 $550,000

C) $1,650,000

D) $833,000

2) Delta Corp. reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Delta Corp.’s gross profit is equal to

A) $770,000.

B) $1,070,000.

C) $1,100,000.

D) $1,500,000.

3) Delta Corp. reported the following items for the current year: Sales = $3,000,000; Cost of Goods Sold = $1,500,000; Depreciation Expense = $170,000; Administrative Expenses = $150,000; Interest Expense = $30,000; Marketing Expenses = $80,000; and Taxes = $300,000. Delta Corp. operating income is equal to

A) $770,000.

B) $1,070,000.

C) $1,100,000.

D) $1,500,000.

4) Use the following information to calculate the company's accounting net income for the year.

A) $300,000

B) $240,000

C) $125,000

D) $120,000

5) Susannah Stores Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. What is Susannah Stores Inc., EBIT?

A) $850,000

B) $875,000

C) $900,000

D) $1,300,000

6) Susannah Stores Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. What is Susannah Stores Inc., net income?

A) $288,000

B) $350,000

C) $377,000

D) $390,000

7) Susannah Stores Inc. has sales of $4,000,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $40,000, and the firm distributed $60,000 in dividend payments to common stockholders. What is Susannah Stores Inc., "Addition to Retained Earnings" that would be reflected per the Retained Earnings Statement Balance?

A) $650,000

B) $390,000

C) $330,000

D) $290,000

8) Conglomerate, Inc. has total current assets of $1,200,000; total current liabilities of $500,000; and long-term assets of $800,000. How much is the firm's Total Liabilities & Equity?

A) $2,500,000

B) $1,300,000

C) $2,000,000

D) $1,800,000

9) Conglomerate, Inc. has sales of $4,250,000; the firm's cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm's interest expense is $250,000, and the corporate tax rate is 40%. What is Conglomerate, Inc.’s tax liability?

A) $258,000

B) $260,000

C) $360,000

D) $600,000

10) Use the following information to answer the questions below. In 2004, Bobbalee, Inc. expects operating income (earnings before interest and taxes) of $18,000,000. In addition, the corporation has $20,000,000 of debt outstanding with a 10 percent interest rate and will pay $1,000,000 in dividends to its common stockholders. Assume that Bobbalee will receive no other sources of income during 2004. Bobbalee’s s taxable income for 2004 will be:

A) $18,000,000.

B) $17,000,000.

C) $16,000,000.

D) $15,000,000.