Chapter 2 HW

I need help with Part A Common Dividends and Addition to retained earnings and Part B Common Stock, retained earnings,Total Common Equity, andTotal Liabilities and Equity.

• ABC Inc. 2011 sales are $900,000. Operating costs (excluding depreciation) are 80% of sales. Net fixed assets are $125,000. Depreciation amounted to 12% of net fixed assets. Interest expenses are $100,000. The tax rate is 30% and ABC Inc. paid 10% in dividends.

Complete the following:

Sales Revenue 900,000

Expenses as a percent of sales (excluding depreciation) 80%

Net fixed asset 125,000

Depreciation as a % of net fixed assets 12%

Tax rate 30%

Interest expense 100,000

Dividend Payout Ratio 10%

ABC Inc. Income Statement

Sales 900,000

Operating costs (excluding depreciation) 900,000 X .80 = 720,000

EDITDA= sales revenue-operating cost = 180, 000

Depreciation 125,000 x .12= 15,000

- Depreciation = 165,000

Interest Expense 100,000

EBT - taxes= net income 65,000

Taxes 19, 500 6500 x .,500

Net Income 45,500 65,000- ,500

Common Dividends __________________

Addition to Retained Earnings ______________________

• ABC Inc. issued $20,000 of new common stock in 2011. Fill in the missing information.

Assets 2011 2010

Cash and Cash Equivalents 40,000 30,000

Short term Investments 4,500 8,500

Accounts Receivable 156,000 180,000

Inventories 80,000 70,000

Total current assets 280,500 288,500

Net Fixed Assets 125,000 100,000

Total Assets 405,500 388,500

Liabilities and Equity 2011 2010

Accounts Payable 15,000 12,500

Accruals 18,500 14,000

Notes Payable 9,000 6,000

Total Current Liabilities 42,500 32,500

Long term debt 123,000 176,950

Total Liabilities 165,500 209,450

Common Stock ______ 140,000

Retained Earnings ______ 39,050

Total Common Equity ______ 179,050

Total Liabilities and Equity _______ 388,500