Britton String Corp. manufactures special strings for musical instruments and tennis rackets. Its most recent sales were $880 million; operating costs (excluding depreciation) equaled 85% of sales; net fixed assets were $300 million; depreciation is 10% of net fixed assets; interest expenses were $22 million; the state plus federal corporate tax rate was 25%; distributed 40% of its net income as dividends. Given this information, create the income statement. Also calculate the total dividends and the addition to retained earnings. Report all dollar figures in millions. The login information required for the problem is summarized in the "Key Input Data" section below. Using this data and the balance sheet above, we created the income statement shown below.


Britton String Corp. Key Input Data for 2020
(Millions of dollars)
Sales Revenue $880
Expenses (excluding depreciation)
85.0% as a percentage of sales
Net fixed assets $300
as a percentage of departure net fixed assets 10.0%
Tax rate 25.0%
Interest expense $22 Dividend Payout
Rate 40%

Britton String Corp .: Income Statement 2020
(Millions of dollars)
Sales ---------------------------------------- ---------- ------------------------$880
Operating costs excluding depreciation ----------- -----$748
EBITDA------------------------------------------ ------- ----------$132
Depreciation (Cumberland ----------------------------- ---30$
no depreciation fee)

EBIT --------------------------------------------- ---- --------------------------------------102$
Interest expense ---- ---------------------------------------------------------- $22
EBT------------------------------------------------ --------------------------- $80
Taxes (25%) ---------------- --------------------------------------------- $20
Net income-- --------------------------------------------------- ----------60$

Joint dividends ------------------------------------ ------------ --24$
Additional to retained earnings-------------------------------- --36$

Required:

B. This is followed by Britton String's partial balance sheets. Britton issued $36 million of new common stock in the most recent year. Using this information and the results in section a, fill in the missing values for common stock, retained earnings, total common stock and total liabilities, and equity.



Dollar value of common stock issued
(in millions of dollars) $36

Britton String Corp: 31 December
Balance Sheets 2020 2019
(Millions of dollars)

Assets:
Cash and cash equivalents $70 $60
Short-term investments $46 $42
Accounts Receivable 120 $ 140 $
Inventories $264 $196
Total current assets $500 $438
Net fixed assets $300 $262
Total assets $800 $700

Liability and equity:
Accounts payable 73 $ 64 $
Accruals $49 $60
Notes payable 30 $ 39 $
Total current liabilities $152 $163
Long-term debt $217 $178
Total liabilities $369 $341 $
Stock ? $249
retained earnings ? $110
Total equity? $359
Total liabilities and equity? $700

Always check balance
(they must be zero): $800.0000 $0.0000

C. Create the cash flow statement for the most recent year.

Statement of Cash Flows 2020
(in thousands of dollars)

Operational activities
Net income ------------------------------------- ---------------------------------- ??
Adjustments:
Non-cash adjustment:
Depreciation ------------------------------------------ -------------------- ??
Due to changes in working capital:
Due to changes in accounts receivable----------------------- ??
Due to change in stock ------------------------------------- ??
Due to the change in accounts payable -------------------------- ??
Due to change in accruals -------------------------- ??
____________
Net cash provided (used) by operating activities ??
____________

Investing Activities
Cash used to acquire gross fixed assets -------------------???
Due to the change in short-term investments ----------------??
__________
Net cash provided (used) by investing activities ??
___________

Financial movements
Due to change in notes payable --------------------------------??
Due to the change in long-term debt---------------------------------???
Due to the change in common stock--------------------------------??
Ordinary dividend payment -----------------------------------??
________
Net cash provided (used) by financing activities ??
________

Net increase/decrease in cash ---------------------------------------??
Add: Cash balance at the beginning of the year-------------??
______
Cash balance at year end ??
______

Check: cash balance
cash flows on statement must equal:
cash on balance sheets;
this value must be zero: $70,000

Answer rating: 100% (QA)

Income Statement for Britton String Corp in millions of dollars Sales Revenue 880 Operating Costs ex... View the full answer