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BUSI 530 Week 2 Homework 2 (Solutions) NEW
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
2. The year¬ end 2010 balance sheet of Brandex Inc.
listed common stock and other paid¬in 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 3¬5 and Table
3¬7.
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
3. 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
4. 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
year¬end 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
5. The table below contains data on Fincorp, Inc., the
balance sheet items correspond to values at
year¬end 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
6. 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
7. 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 long¬termdebt¬equity 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 debt¬to¬equity ratio of 0.62 and a
market¬to¬book 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
8. 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.)
