# FRL 300 Chapter 2 Homework

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FRL 300 Chapter 2 Homework

1. A firm has common stock of \$87, paid-in surplus of \$240, total liabilities of \$395, current assets of \$360, and fixed assets of \$570. What is the amount of the shareholders' equity?

1. Recently, the owner of Martha's Wares encountered severe legal problems and is trying to sell her business. The company built a building at a cost of \$1,270,000 that is currently appraised at \$1,470,000. The equipment originally cost \$750,000 and is currently valued at \$497,000. The inventory is valued on the balance sheet at \$440,000 but has a market value of only one-half of that amount. The owner expects to collect 98 percent of the \$240,200 in accounts receivable. The firm has \$10,800 in cash and owes a total of \$1,470,000. The legal problems are personal and unrelated to the actual business. What is the market value of this firm?

1. The tax rates are as shown.

 Taxable Income Tax Rate \$0 – 50,000 15% 50,001 – 75,000 25% 75,001 – 100,000 34% 100,001 – 335,000 39%

What is the average tax rate for a firm with taxable income of \$130,513?

1. Your firm has net income of \$351 on total sales of \$1,440. Costs are \$790 and depreciation is \$110. The tax rate is 35 percent. The firm does not have interest expenses. What is the operating cash flow?

1. At the beginning of the year, long-term debt of a firm is \$276 and total debt is \$323. At the end of the year, long-term debt is \$253 and total debt is \$333. The interest paid is \$19. What is the amount of the cash flow to creditors?

1. A firm has sales of \$1,050, net income of \$209, net fixed assets of \$510, and current assets of \$266. The firm has \$84 in inventory. What is the common-size statement value of inventory?

1. Mario's Home Systems has sales of \$2,880, costs of goods sold of \$2,220, inventory of \$516, and accounts receivable of \$436. How many days, on average, does it take Mario's to sell its inventory?

 Use the following information to answer this question.

 Windswept, Inc. 2010 Income Statement (\$ in millions) Net sales \$ 9,850 Less: Cost of goods sold 8,090 Less: Depreciation 485 Earnings before interest and taxes \$ 1,275 Less: Interest paid 118 Taxable Income \$ 1,157 Less: Taxes 405 Net income \$ 752

 Windswept, Inc. 2009 and 2010 Balance Sheets (\$ in millions) 2009 2010 2009 2010 Cash \$ 290 \$ 320 Accounts payable \$ 1,630 \$ 1,885 Accounts rec. 1,120 1,020 Long-term debt 1,180 1,340 Inventory 2,000 1,775 Common stock \$ 3,500 \$ 3,080 Total \$ 3,410 \$ 3,115 Retained earnings 670 920 Net fixed assets 3,570 4,110 Total assets \$ 6,980 \$ 7,225 Total liab. & equity \$ 6,980 \$ 7,225

Questions continued to No. 30 in the solutions

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