Chap2 - Chapter 2 Accounting Statements and Cash Flow 2.1...

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Chapter 2: Accounting Statements and Cash Flow 2.1 Assets Current assets Cash $ 4,000 Accounts receivable 8,000 Total current assets $ 12,000 Long-tern assets Machinery $34,000 Patents 82,000 Total long-term assets $116,000 Total assets $128,000 Liabilities and equity Current liabilities Accounts payable $ 6,000 Taxes payable 2,000 Total current liabilities $ 8,000 Long-term liabilities Bonds payable $7,000 Stockholders equity Preferred stock $19,000 Common stock 88,000 Retained earnings 6,000 Total stockholders equity $113,000 Total liabilities and equity $128,000 2.2 One year ago Today Long-term debt $50,000,000 $50,000,000 Preferred stock 30,000,000 30,000,000 Common stock 100,000,000 110,000,000 Retained earnings 20,000,000 22,000,000 Total $200,000,000 $212,000,000 2.3 Income Statement Total operating revenues $500,000 Less: Cost of goods sold $200,000 Administrative expenses 100,000 300,000 Earnings before interest and taxes $200,000 Less: Interest expense 50,000 Earnings before taxes $150,000 Taxes 60,000 Net income $90,000 Answers to End-of-Chapter Problems B-6
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2.4 a. If you report a loss, you do not owe any taxes. Income Statement The Flying Lion Corporation 2004 2005 Net sales $800,000 $500,000 Cost of goods sold (560,000) (320,000) Operating expenses (75,000) (56,000)
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