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Ch2_sol - 2-2A Sharpe Mfg Company Balance Sheet ASSETS Cash...

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2-2A. Sharpe Mfg. Company Balance Sheet December 31, 2003 ASSETS Cash $ 96,000 Accounts receivable 120,000 Inventory 110,000 Total current assets $ 326,000 Machinery and equipment $ 700,000 Accumulated depreciation (236,000) Net fixed assets 464,000 Total assets $ 790,000 LIABILITIES & EQUITY Liabilities Current Liabilities Notes payable $ 100,000 Accounts payable 90,000 Total current liabilities $ 190,000 Long-term debt 160,000 Total liabilities $ 350,000 Equity Common stock $ 320,000 Retained earnings Prior year 100,000 Current year 20,000 Total equity $ 440,000 Total liabilities and equity $ 790,000 Sharpe Mfg. Company Income Statement For the Year Ended December 31, 2003 Sales $ 800,000 Cost of goods sold 500,000 Gross profits $ 300,000 Operating expense 280,000 Net income $ 20,000 (Assume no interest accrued or taxes)
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2-4A. Potts, Inc. - Corporate Income Tax Sales $ 6,000,000 Cost of goods sold and cash operating expenses 5,600,000 Operating profit $ 400,000 Interest expense 30,000 Taxable Income $ 370,000 Tax Liability: $50,000 x 0.15 = $7,500 25,000 x 0.25 = 6,250 25,000 x 0.34 = 8,500 235,000 x 0.39 = 91,650 35,000 x 0.34 = 11,900 $370,000 $125,800
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2-7A. Abrams Manufacturing Free cash flows from an asset perspective: Step 1: Compute after-tax cash flows from operations Operating Income $
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