BUSI 530 Week 2 HomeWork 2 (SOLUTIONS) – Liberty University
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Question 1

Construct a balance sheet for Sophie’s Sofas given the following data. (Be sure to list the assets and liabilities in order of their liquidity.)

Question 2

Using Table 3.7, calculate the marginal and average tax rates for a single taxpayer with the following incomes: (Do not round intermediate calculations. Round “Average tax rate” to 2 decimal places.)

Question 3

The year­ end 2010 balance sheet of Brandex Inc. listed common stock and other paid­in capital at \$2,200,000 and retained earnings at \$4,500,000. The next year, retained earnings were listed at \$4,800,000. The firm’s net income in 2011 was \$1,010,000. There were no stock repurchases during the year. What were the dividends paid by the firm in 2011?

Question 4

You have set up your tax preparation firm as an incorporated business. You took \$75,500 from the firm as your salary. The firm’s taxable income for the year (net of your salary) was \$19,000. Assume you pay personal taxes as an unmarried taxpayer. Use the tax rates presented in Table 3­5 and Table 3­7.

Question 5

The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested \$2,000,000 in setting up a production plant. He believes that he could sell his patent for \$50 million

Question 6

Sheryl’s Shipping had sales last year of \$14,500. The cost of goods sold was \$7,400, general and administrative expenses were \$1,900, interest expenses were \$1,400, and depreciation was \$1,900. The firm’s tax rate is 35%

Question 7

Ponzi Products produced 96 chain letter kits this quarter, resulting in a total cash outlay of \$10 per unit. It will sell 48 of the kits next quarter at a price of \$11, and the other 48 kits in two quarters at a price of \$12. It takes a full quarter for it to collect its bills from its customers. (Ignore possible sales in earlier or later quarters and assume all positive cash flow is distributed as expenses or earnings to shareholders.)

Question 8

During the last year of operations, accounts receivable increased by \$9,200, accounts payable increased by \$4,200, and inventories decreased by \$1,200. What is the total impact of these changes on the difference between profits and cash flow? (Input the amount as a positive value.)

Question 9

Butterfly Tractors had \$17.00 million in sales last year. Cost of goods sold was \$8.60 million, depreciation expense was \$2.60 million, interest payment on outstanding debt was \$1.60 million, and the firm’s tax rate was 35%.

Question 10

Candy Canes, Inc., spends \$172,000 to buy sugar and peppermint in April. It produces its candy and sells it to distributors in May for \$230,000, but it does not receive payment until June. For each month, find the firm’s sales, net income, and net cash flow. (Leave no cells blank ­ be certain to enter “0” wherever required. Negative amounts should be indicated by a minus sign. Omit the “\$” sign in your responses.)

Question 11

The table below contains data on Fincorp, Inc., the balance sheet items correspond to values at year­end of 2010 and 2011, while the income statement items correspond to revenues or expenses during the year ending in either 2010 or 2011. All values are in thousands of dollars.

Question 12

The table below contains data on Fincorp, Inc., the balance sheet items correspond to values at year­end of 2010 and 2011, while the income statement items correspond to revenues or expenses during the year ending in either 2010 or 2011. All values are in thousands of dollars

Question 13

Here are simplified financial statements of Phone Corporation from a recent year:

Question 14

Here are simplified financial statements of Phone Corporation from a recent year

Question 15

Consider the following information:

Question 16

Chik’s Chickens has average accounts receivable of \$5,833. Sales for the year were \$9,300. What is its average collection period? (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Question 17

Salad Daze maintains an inventory of produce worth \$380. Its total bill for produce over the course of the year was \$71,000. How old on average is the lettuce it serves its customers? (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Question 18

Assume a firm’s inventory level of \$20,000 represents 20 days’ sales. What is the inventory turnover ratio? (Use 365 days in a year. Do not round intermediate calculations. Round your answer to 2 decimal places.)

Question 19

Lever Age pays a(n) 10% rate of interest on \$9.0 million of outstanding debt with face value \$9.0 million. The firm’s EBIT was \$3.0 million.

Question 20

Keller Cosmetics maintains an operating profit margin of 5.9% and asset turnover ratio of 3.9

Question 21

Torrid Romance Publishers has total receivables of \$2,980, which represents 20 days’ sales. Total assets are \$74,500. The firm’s operating profit margin is 5.0%. Find the firm’s asset turnover ratio and ROA. (Use 365 days in a year. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Question 22

A firm has a long­term debt­equity ratio of 0.4. Shareholders’ equity is \$1.06 million. Current assets are \$260,000, and the current ratio is 2.0. The only current liabilities are notes payable. What is the total debt ratio? (Round your answer to 2 decimal places.)

Question 23

A firm has a debt­to­equity ratio of 0.62 and a market­to­book ratio of 2.0. What is the ratio of the book value of debt to the market value of equity? (Round your answer to 2 decimal places.)

Question 24

In the past year, TVG had revenues of \$2.99 million, cost of goods sold of \$2.49 million, and depreciation expense of \$89,300. The firm has a single issue of debt outstanding with book value of \$1.11 million on which it pays an interest rate of 10%. What is the firm’s times interest earned ratio? (Round your answer to 2 decimal places.)