finance questions-12

3. Balance Sheet. Construct a balance sheet for Sophie’s Sofas given the following data. What is shareholders’ equity? (LO3-1)Cash balances = $10,000Inventory of sofas = $200,000Store and property = $100,000Accounts receivable = $22,000Accounts payable = $17,000Long-term debt = $170,000

4. Income Statement. A firm’s income statement included the following data. The firm’s average tax rate was 20%. (LO3-1)Assets Liabilities and Equitya. f.b. g.c. h.d. i.e.  j.Total assets Total liabilities and equityCost of goods sold $8,000Income taxes paid $2,000Administrative expenses $3,000Interest expense $1,000Depreciation $1,000

a. What was the firm’s net income?

b. What must have been the firm’s revenues?

c. What was EBIT?

8. Financial Statements. Henry Josstick has just started his first accounting course and has pre-pared the following balance sheet and income statement for Omega Corp. Unfortunately, although the data for the individual items are correct, he is very confused as to whether an item should go in the balance sheet or income statement and whether it is an asset or liability. Help him by rear-ranging the items and filling in the blanks

9. Market versus Book Values. The founder of Alchemy Products Inc. discovered a way to turn gold into lead and patented this new technology. He then formed a corporation and invested $200,000 in setting up a production plant. He believes that he could sell his patent for $50 mil-lion. (LO3-2)

a. What is the book value of the firm?

b. What is the market value of the firm?

c. If there are 2 million shares of stock in the new corporation, what is the book value per share?

d. What is the price per share?

14. Income versus Cash Flow. Butterfly Tractors had $14 million in sales last year. Cost of goods sold was $8 million, depreciation expense was $2 million, interest payment on outstanding debt was $1 million, and the firm’s tax rate was 21%. (LO3-3)

a. What was the firm’s net income?

b. What was the firm’s cash flow?

c. What would happen to net income and cash flow if depreciation were increased by $1 million?

d. Would you expect the change in depreciation to have a positive or negative impact on the firm’s stock price?

e. What would be the impact on net income if depreciation was $1 million and interest expense was $2 million?

f. What would be the impact on cash flow if depreciation was $1 million and interest expense was $2 million?