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LG1 2-33 Statement of Retained Earnings Thelma and Louie, Inc., started the year with a balance
of retained earnings of $543 million and ended the year with retained earnings of $589 million.
The company paid dividends of $35 million to the preferred stockholders and $88 million to
common stockholders. Calculate Thelma and Louie’s net income for the year.
Statement of Retained Earnings as of December 31, 2015
LG1 2-34 Statement of Retained Earnings Jamaica Tours, Inc., started the year with a balance of
retained earnings of $1,780 million. The company reported net income for the year of $284
million and paid dividends of $17 million to the preferred stockholders and $59 million to
common stockholders. Calculate Jamaica Tour’s end-of-year balance in retained earnings.
Statement of Retained Earnings as of December 31, 2015
advanced 2-35 Income Statement Listed is the 2015 income statement for Tom and Sue Travels, Inc.
problems
LG1
Tom and Sue Travels, Inc.
Income Statement for Year Ending December 31, 2015
(in millions of dollars)
Net sales $16.500
Net income $ 1.645
The CEO of Tom and Sue’s wants the company to earn a net income of $2.250 million in 2016.
Tom and Sue Travels, Inc.
Income Statement for Year Ending December 31, 2016
(in millions of dollars)
LG1 2-36 Income Statement You have been given the following information for PattyCake’s Athletic
Wear Corp. for the year 2015:
a. Net sales = $38,250,000;
b. Cost of goods sold = $22,070,000;
c. Other operating expenses = $5,300,000;
d. Addition to retained earnings = $1,195,500;
e. Dividends paid to preferred and common stockholders = $1,912,000;
f. Interest expense = $1,785,000;
g. The firm’s tax rate is 30 percent;
h. In 2016, net sales are expected to increase by $9.75 million;
i. Cost of goods sold is expected to be 60 percent of net sales;
j. Depreciation and other operating expenses are expected to be the same as in 2015;
k. Interest expense is expected to be $2,004,286;
l. The tax rate is expected to be 30 percent of EBT;
m. Dividends paid to preferred and common stockholders will not change.
Calculate the addition to retained earnings expected in 2016.
Income Statement for Year Ending December 31, 2015
Income Statement for Year Ending December 31, 2016
LG5 2-37 Free Cash Flow Rebecky’s Flowers 4U, Inc., had free cash flows during 2015 of $43
million, NOPAT of $85 million, and depreciation of $14 million. Using this information, fill in
the blanks on Rebecky’s balance sheet that follows.
Rebecky’s operating cash flow for 2015 was:
Rebecky’s Flowers 4U, Inc.
Balance Sheet as of December 31, 2015 and 2014
(in millions of dollars)
2015 2014 2015 2014
Assets Liabilities & Equity
LG5 2-38 Free Cash Flow Vinny’s Overhead Construction had free cash flow during 2015 of $25.4
million. The change in gross fixed assets on Vinny’s balance sheet during 2015 was $7.0 million
and the change in net operating working capital was $8.4 million. Using this information, fill in
the blanks on Vinny’s income statement that follows.
Vinny’s Overhead Construction, Corp.
Income Statement for Year Ending December 31, 2015
(in millions of dollars)
Net sales $ 182.10 Step 1. (= $66.00 + $116.10)
research it! Reviewing Financial Statements
Go the website of Wal-Mart Stores, Inc. at www.walmartstores.com and get the latest financial
statements from the annual report using the following steps.
Go to Wal-Mart Stores, Inc.’s website at www.walmartstores.com. Click on Investors, then
select Financial Information; next choose Annual Reports; finally, click on the most recent date.
This will bring the file onto your computer that contains the relevant data. Locate the total assets,
total equity, net sales, net income, dividends paid, cash flows from operating activities, and cash
flows from investing activities for the last two years. How have these items changed over the last
two years?
integrated mini-case: Working with Financial Statements
Shown are partial financial statements for Garners’ Platoon Mental Health Care, Inc. Fill in the
blanks on the four financial statements.
Garners’ Platoon Mental Health Care, Inc.
Balance Sheet as of December 31, 2015 and 2014
(in millions of dollars)
2015 2014 2015 2014
Assets Liabilities & Equity
Current assets: Current liabilities :
Cash and marketable Accrued wages and
securities $ 421 $____ taxes $ 316 $ 242
Accounts receivable ____ 1,020 Accounts payable 867 791
Inventory 1,760 1,581 Notes payable ____ 714
Total $3,290 $____ Total $2,055 $1,747
Garners’ Platoon Mental Health Care, Inc.
Income Statement for Years Ending December 31, 2015 and 2014
(in millions of dollars)
Earnings before taxes (EBT) $2,094 $1,737
Less: Taxes _____
Net income $1,327 $1,105
Garners’ Platoon Mental Health Care, Inc.
Statement of Cash Flows for Year Ending December 31, 2015
(in millions of dollars)
B. Cash flows from investing activities
Subtractions:
Increase in fixed assets $ ___
Increase in other long-term assets ___
Net cash flow from investing activities: $ ___
C. Cash flows from financing activities
D. Net change in cash and marketable securities $ 26
Garners’ Platoon Mental Health Care, Inc.
Statement of Retained Earnings as of December 31, 2015
(in millions of dollars)
Balance of retained earnings, December 31, 2014 $2,440
Plus: Net income for 2015 _____
Less: Cash dividends paid
Preferred stock $____
Common stock _____
Total cash dividends paid _____
Balance of retained earnings, December 31, 2015 $____
SOLUTION:
Garners’ Platoon Mental Health Care, Inc.
Balance Sheet as of December 31, 2015 and 2014
(in millions of dollars)
2015 2014 2015 2014
Assets Liabilities & Equity
Current assets: Current liabilities :
Cash and marketable Accrued wages and
Garners’ Platoon Mental Health Care, Inc.
Income Statement for Years Ending December 31, 2015 and 2014
(in millions of dollars)
2015 2014
Less: Preferred stock dividends $ 60 $ 60
Garners’ Platoon Mental Health Care, Inc.
Statement of Cash Flows for Year Ending December 31, 2015
(in millions of dollars)
A. Cash flows from operating activities
Net income $1,327
Increase in common and preferred stock 0
Garners’ Platoon Mental Health Care, Inc.
Statement of Retained Earnings as of December 31, 2015
(in millions of dollars)
