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61. Corporate Taxes Suppose that in addition to the $300,000 of taxable income from
operations, Liam's Burgers, Inc. received $25,000 of interest on state-issued bonds and $50,000
of dividends on common stock it owns in Sodas, Inc.
Using the tax schedule in Table 2.3 what is Liam's income tax liability?
What are Liam's average and marginal tax rates on total taxable income?
62. Statement of Cash Flows Fina's Faucets, Inc. has net cash flows from operating
activities for the last year of $17 million. The income statement shows that net income is $15
million and depreciation expense is $6 million. During the year, the change in inventory on the
balance sheet was an increase of $4 million, change in accrued wages and taxes was an increase
of $1 million and change in accounts payable was an increase of $1 million. At the beginning of
the year the balance of accounts receivable was $5 million. What was the end of year balance for
accounts receivable?
63. Statement of Cash Flows Zoe's Dog Biscuits, Inc. has net cash flows from operating
activities for the last year of $226 million. The income statement shows that net income is $150
million and depreciation expense is $85 million. During the year, the change in inventory on the
balance sheet was an increase of $14 million, change in accrued wages and taxes was an
increase of $15 million and change in accounts payable was an increase of $10 million. At the
beginning of the year the balance of accounts receivable was $45 million. What was the end of
year balance for accounts receivable?
64. Statement of Cash Flows Nickolas's Nut Farms, Inc. has net cash flows from operating
activities for the last year of $25 million. The income statement shows that net income is $15
million and depreciation expense is $6 million. During the year, the change in inventory on the
balance sheet was a decrease of $4 million, change in accrued wages and taxes was a decrease
of $1 million and change in accounts payable was a decrease of $1 million. At the beginning of
the year the balance of accounts receivable was $5 million. What was the end of year balance for
accounts receivable?
65. Statement of Cash Flows Crispy Corporation has net cash flow from financing activities
for the last year of $20 million. The company paid $5 million in dividends last year. During the
year, the change in notes payable on the balance sheet was an increase of $2 million, and change
in common and preferred stock was an increase of $3 million. The end of year balance for long-
term debt was $45 million. What was their beginning of year balance for long-term debt?
66. Statement of Cash Flows Full Moon Productions Inc. has net cash flow from financing
activities for the last year of $105 million. The company paid $15 million in dividends last year.
During the year, the change in notes payable on the balance sheet was an increase of $40
million, and change in common and preferred stock was an increase of $50 million. The end of
year balance for long-term debt was $50 million. What was their beginning of year balance for
long-term debt?
67. Statement of Cash Flows Café Creations Inc. has net cash flow from financing activities
for the last year of $25 million. The company paid $15 million in dividends last year. During the
year, the change in notes payable on the balance sheet was a decrease of $40 million, and
change in common and preferred stock was an increase of $50 million. The end of year balance
for long-term debt was $40 million. What was their beginning of year balance for long-term
debt?
68. Free Cash Flow The 2010 income statement for Pete's Pumpkins shows that
depreciation expense is $250 million, EBIT is $500 million, EBT is $320 million, and the tax rate is
30 percent. At the beginning of the year, the balance of gross fixed assets was $1,600 million and
net operating working capital was $640 million. At the end of the year gross fixed assets was
$2,000 million. Pete's free cash flow for the year was $630 million. What is their end of year
balance for net operating working capital?
69. Free Cash Flow The 2013 income statement for Lou's Shoes shows that depreciation
expense is $2 million, EBIT is $5 million, EBT is $3 million, and the tax rate is 40 percent. At the
beginning of the year, the balance of gross fixed assets was $16 million and net operating
working capital was $6 million. At the end of the year gross fixed assets was $20 million. Lou's
free cash flow for the year was $4 million. What is their end of year balance for net operating
working capital?
70. Free Cash Flow The 2013 income statement for Paige's Purses shows that depreciation
expense is $10 million, EBIT is $25 million, EBT is $15 million, and the tax rate is 30 percent. At
the beginning of the year, the balance of gross fixed assets was $80 million and net operating
working capital was $30 million. At the end of the year gross fixed assets was $100 million.
Paige's free cash flow for the year was $20 million. What is their end of year balance for net
operating working capital?
71. Free Cash Flow The 2013 income statement for Betty's Barstools shows that
depreciation expense is $100 million, EBIT is $400 million, and taxes are $120 million. At the end
of the year, the balance of gross fixed assets was $510 million. The increase in net operating
working capital during the year was $94 million. Betty's free cash flow for the year was $625
million. What was the beginning of year balance for gross fixed assets?
72. Free Cash Flow The 2013 income statement for John's Gym shows that depreciation
expense is $20 million, EBIT is $80 million, and taxes are $24 million. At the end of the year, the
balance of gross fixed assets was $102 million. The increase in net operating working capital
during the year was $18 million. John's free cash flow for the year was $41 million. What was the
beginning of year balance for gross fixed assets?
73. Statement of Retained Earnings Bike and Hike, Inc. started the year with a balance of
retained earnings of $100 million and ended the year with retained earnings of $128 million. The
company paid dividends of $9 million to the preferred stock holders and $22 million to common
stock holders. What was Bike and Hike's net income for the year?
74. Statement of Retained Earnings Soccer Starz, Inc. started the year with a balance of
retained earnings of $25 million and ended the year with retained earnings of $32 million. The
company paid dividends of $2 million to the preferred stock holders and $6 million to common
stock holders. What was Soccer Starz's net income for the year?
75. Statement of Retained Earnings Jamaican Ice Cream Corp. started the year with a
balance of retained earnings of $100 million. The company reported net income for the year of
$45 million, paid dividends of $2 million to the preferred stock holders and $15 million to common
stock holders. What is Jamaican Ice Cream's end of year balance in retained earnings?
76. Income Statement The following is the 2013 income statement for Lamps, Inc.
The CEO of Lamps wants the company to earn a net income of $12 million in 2014. Cost of goods
sold is expected to be 75 percent of net sales, depreciation expense is not expected to change,
interest expense is expected to increase to $4 million, and the firm's tax rate will be 40 percent.
What is the net sales needed to produce net income of $12 million?
77. Income Statement You have been given the following information for Halle's Holiday
Store Corp. for the year 2013:
Net sales = $50,000,000;
Cost of goods sold = $35,000,000;
Addition to retained earnings = $2,000,000;
Dividends paid to preferred and common stockholders = $3,000,000;
Interest expense = $3,000,000.
The firm's tax rate is 30 percent.
In 2014, net sales are expected to increase by $5 million,
cost of goods sold is expected to be 65 percent of net sales,
expensed depreciation is expected to be the same as in 2013,
interest expense is expected to be $2,500,000,
the tax rate is expected to be 30 percent of EBT, and
dividends paid to preferred and common stockholders will not change.
What is the addition to retained earnings expected in 2014?
78. Free Cash Flow Martha's Moving Van 4U, Inc. had free cash flow during 2013 of $1
million, EBIT of $30 million, tax expense of $8 million, and depreciation of $4 million. Using this
information, what was Martha's Accounts Payable ending balance in 2013?
