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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