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2. At the end of the year, the Long Life Bulb Company announced that it had produced a gross profit of $1,000,000. The company has also established

"1. At the end of the year, the Long Life Bulb Company announced that it had produced a gross profit of $1,000,000. The company has also established that over the course of this year it has incurred $345,000 in operating expenses and $125,000 in interest expenses. The company is subject to a 30% tax rate and has declared $57,000 total preferred stock dividends.

a. What factors must be considered in regards the dividend Life Bulb Company can pay to their common stockholders?

b. Compute the increased retained earnings for 2009 if the company were to declare a $2.25 common stock dividend and the company has 100,000 shares of common stock outstanding. Prepare a statement of changes of stockholders’ equity to reflect the activity specified in a) and b).

2. Darling Paper Container, Inc. has purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period. Prepare a depreciation schedule showing the depreciation expense for each year.

3.In a meeting with their financial advisor, Mr. and Mrs. Smith concluded that they would need $40,000 per year during the retirement years in order to live comfortably. They
will retire ten years from now and expect a 20-year retirement period. How much should Mr. and Mrs. Smith deposit now in an account paying 9 percent to reach financial happiness during retirement?

4.A firm has had the indicated earnings per share over the last three years.
Year EPS
2010 $3.00
2009 $2.00
2008 $1.00

2. At the end of the year, the Long Life Bulb Company announced that it had produced a gross profit of $1,000,000. The company has also established that over the course of this year it has incurred $345,000 in operating expenses and $125,000 in interest expenses. The company is subject to a 30% tax rate and has declared $57,000 total preferred stock dividends. a. What factors must be considered in regards the dividend Life Bulb Company can pay to their common stockholders? b. Compute the increased retained earnings for 2009 if the company were to declare a $2.25 common stock dividend and the company has 100,000 shares of common stock outstanding. Prepare a statement of changes of stockholders’ equity to reflect the activity specified in a) and b). 4. Darling Paper Container, Inc. has purchased several machines at a total cost of $300,000. The installation cost for this equipment was $25,000. The firm plans to depreciate the equipment using the MACRS 5-year normal recovery period. Prepare a depreciation schedule showing the depreciation expense for each year. 5. In a meeting with their financial advisor, Mr. and Mrs. Smith concluded that they would need $40,000 per year during the retirement years in order to live comfortably. They will retire ten years from now and expect a 20-year retirement period. How much should Mr. and Mrs. Smith deposit now in an account paying 9 percent to reach financial happiness during retirement? 6. A firm has had the indicated earnings per share over the last three years. Year EPS 2010 $3.00 2009 $2.00 2008 $1.00
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