Problem 3.5 from Page 106, Chapter 3 A. Construct Brandywine’s 2011 income statement Brandywine Homecare Statement of Income Year ended December 31, 2011 Revenue: Total revenues $12,000,000 Expenses: Expenses $9,000,000 Depreciation $1,500,000 Total Expenses $10,500,000 Net Income $1,500,000 B. What were Brandywine’s net income, total profit margin, and cash flow? The facilities net income is Total revenues which is the total revenue minus total expense. Their profit margin equals the net income and revenue times 100. Their cash flow is the net income plus depreciation.
What are the earnings after interest? Earnings after interest = (EBIT - Interest on debt) Interest = $0 EBIT = $3,000 = $3,000 – ($5,000 x 0.10) = $3,000 - $500 = $2,500 (Earnings after interest) Firm A Firm B $2,500 $2,500 c. If sales increase by 10 percent to 11,000 units, by what percentage will each firm’s earnings after interest increase? To answer the question, determine the earnings after taxes and compute the percentage increase in these earnings from the answers you derived in part b. EBIT = (Sales Revenue - Variable Cost - Fixed Cost) = 10,000 x (1.1 x $2.50) = $27,500 = 10,000 x (1.1 x $1) = $11,000 = $12,000 EBIT = $4,500 ($27,500 - $11,000 - $12,000) Earnings after interest = (EBIT - Interest on debt) Interest = $0 EBIT = $4,500 = $4,500 – ($5000 x 0.10) = $4,500 - $500 (Less interest) = $4,000 (Earnings after interest) = $4,500 - $3000 / (3000 x 100%) Firm A Firm B = (4000 - 2500) x (2500 x 100%) 50% increase = 60% (Earnings after interest % increase percentage) d. Why are the percentage changes different? The percentage increased in earnings based on the higher taxes Firm B acquired from its financed debt. What happened is the firm’s profits were reduced by
Winston has $10 billion in total as- sets. Its balance sheet shows $1 billion in current liabilities, $3 billion in long-term debt, and $6 billion in common equity. It has 800 million shares of common stock outstanding. What is Winston’s market/book ratio? Answer Market value per share =$75 Common equity= 6,000,000 Number of share outstanding =800,000,000 Market to book ration = $75/(6,000,000/800,000,000) 6,000,000/800,000,000=.75 Market to book ration= 75/.75= 100 3-4 Price/Earnings Ratio A company has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0.
There were about 8,000 filers who reported gross incomes of more than $10 million. Thus, under Obama’s proposed Buffet Rule, about a quarter of a million millionaires would pay higher taxes. The marginal tax rate is the percentage paid on gross income. A wealthy tax filer pays the size of their income that is taxed at the top 35 percent rate. Middle-class taxpayers generally pay marginal rates of 15 percent or 25 percent.
2. On January 1, 2007, Fire wire Company acquired 40 percent of Browser Company's common stock. For this acquisition, Fire wire paid $45,000 above book value. The full differential was attributed to equipment with a remaining life of ten years and zero salvage value at the date of acquisition. During 2007 and 2008, Browser reported net income of $90,000 and $50,000 and paid dividends of $40,000 and $60,000, respectively.
$3,000.00 (10,000x2.50)-(10,000x1)-12,0000=3,000 b. What are the earnings after interest? $2,500.00 Firm A earned $0.00 in interest (3,000-0)=$3,000 Firm B earned $500.00 in interest 5,000x10% = $500.00 Earnings after interest (3,000-500) = $2,500.00 c. If sales increase by 10 percent to 11,000 units, by what percentage will each firm’s earnings after interest increase? To answer the question, determine the earningsafter taxes and compute the percentage increase in these earnings from the answers you derived in part b. EBIT $4500 ($11000 x 2.50) – ($11000 x 1) –$12000)= $4500 Firm A: $0 interest earned Earnings after taxes ($4500 – 0= $4500) = $4,500.00 Percentage increase= (4500-3000)/3000x10=50% Firm B: interest earned = ($5000 x 10%)=$500 Earnings after taxes= ($4500 - $500=$4000) = $4,500.00 Percentage increase= ($4000-$2500)/$2500 = 60% d. Why are the percentage changes different?The diference is because of the the difference after taxes and the earnings after interest from Firm A to Firm
b. Revising the estimated life of equipment from 10 years to 8 years. c. Not writing off obsolete inventory. d. Reducing research and development expenditures. 2. Prophet Corporation has an extraordinary loss of $200,000, an unusual gain of $140,000, and a tax rate of 40%.
• debit to Allowance for Doubtful Accounts for $3,300. Multiple Choice Question 182 The financial statements of the Melton Manufacturing Company reports net sales of $300,000 and accounts receivable of $50,000 and $30,000 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days? • 60.8 • 96.1 • 36.5 • 48.7 Find the final exam answers here ACC 291 Final Exam Answers Multiple Choice Question 119 Stine Company purchased machinery with a list price of $64,000. They were given a 10% discount by the manufacturer.
Reduce price of 10HP motor to that of 7.5HP: 1. Cost of 10HP motor is $908, but price drops from $1,580 to $1,200, so profit is reduced from $672 per motor to $292 per motor. Effectively this is a margin reduction of 42.5% at full price to 24.3% margin at the discounted price. 2. Customer purchases motor for $1,200.
The weighted-average number of common shares outstanding during the year is 200,000 shares, and the weighted-average number of preferred shares outstanding during the year is 10,000 shares. Earnings per share for Clair, Inc. is (round your answer to the nearest cent): $3.25 Correct! Net income minus preferred dividends is divided by the weighted average of common shares outstanding to compute earnings per share - Prior period adjustments are reported as: an addition to (or a deduction from) the beginning balance of retained earnings. orrect! Prior period adjustments are added to (or deducted from) the beginning retained earnings balance.