Chapter 2- Book Problems

Chapter 2- Book Problems - Chapter 2 Book Problems 1 To...

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1. To find owner’s equity, we must construct a balance sheet as follows: Balance Sheet CA $5,000 CL $4,300 NFA 23,000 LTD 13,000 OE ?? TA $28,000 $28,000 We know that total liabilities and owner’s equity (TL & OE) must equal total assets of $28,000. We also know that TL & OE is equal to current liabilities plus long-term debt plus owner’s equity, so owner’s equity is: OE = $28,000 – 13,000 – 4,300 = $10,700 NWC = CA – CL = $5,000 – 4,300 = $700 2. The income statement for the company is: Income Statement Sales $527,000 Costs 280,000 Depreciation 38,000 EBIT $209,000 Interest 15,000 EBT $194,000 Taxes(35%) 67,900 Net income $126,100 3. One equation for net income is: Net income = Dividends + Addition to retained earnings Rearranging, we get: Addition to retained earnings = Net income – Dividends = $126,100 – 48,000 = $78,100 4. EPS = Net income / Shares = $126,100 / 30,000 = $4.20 per share DPS = Dividends / Shares = $48,000 / 30,000
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Chapter 2- Book Problems - Chapter 2 Book Problems 1 To...

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