Ross5eChap02sm

Ross5eChap02sm - Chapter 2 Accounting Statements and Cash...

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Chapter 2: Accounting Statements and Cash Flow 2.2 The long–term debt account will increase by $8 million, the amount of the new long–term debt issue. Since the company sold 10 million new shares of stock with a $1 par value, the common stoc account will increase by $10 million. The capital surplus account will increase by $16 million, the value of the new stock sold above its par value. Since the company had a net income of $7 million, and paid $4 million in dividends, the addition to retained earnings was $3 million, which will increase the accumulated retained earnings account. So, the new long–term debt and stockholders’equity portion of the balance sheet will be: Long–term Debt $68,000,000 Preferred Stock 18,000,000 Common Stock ($1 par value) 35,000,000 Retained Earnings $141,000,000 Capital Surplus 16,000,000 Total Liabilities & Equity $278,000,000
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Answers to End-of-Chapter Problems B- 7 2.4 a. OCF = EBIT + Depreciation – Taxes OCF = $47,100 + 7,000 – 12,840
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This note was uploaded on 06/11/2011 for the course ACTSC 371 taught by Professor Wood during the Spring '08 term at Waterloo.

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Ross5eChap02sm - Chapter 2 Accounting Statements and Cash...

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