Chapter 2

Problems 2,3,4,6,7,8,14,15,19,25,26
Input boxes in tan
Output boxes in yellow
Given data in blue
Calculations in red
Answers in green
Chapter 2
Questions 2-4
Input area:
Sales
Costs
Depreciation expense
Interest expense
Tax rate
Cash dividends
Common Stock
Output area:
Income Statement
Sales - $
Costs -
Depreciation expense -
EBIT 0
Interest expense - $
EBT - $
Taxes - $
Net income - $
Addition to retained earnings = Net income - Cash dividends =
Earnings per share = Net income / Common stock outstanding =
Dividends per share = Cash dividends / Common stock outstanding =
Addition to retained earnings = Net income - Cash dividends = - $
Earnings per share = Net income / Common stock outstanding = #DIV/0!
Dividends per share = Cash dividends / Common stock outstanding = #DIV/0!
Chapter 2
Questions 6,7
Input area:
2004 Taxable income - $
Taxable income
0 - 50,000
50,001 - 75,000
75,001 - 100,000
100,001 - 335,000
335,001 - 10,000,000
10,000,001 - 15,000,000
15,000,001 - 18,333,333
18,333,334 +
Output area:
Taxes:
0% - $
0% 0
0% 0
0% 0
0% 0
0% 0
0% 0
0% 0
- $
Average tax rate: - $ = #DIV/0!
0
The marginal tax rate is 39%.
Chapter 2
Question 8
Input area:
Sales
Costs
Depreciation Expense
Interest Expense
Tax rate
Output area:
Income Statement
Sales - $
Costs -
Depreciation expense -
EBIT 0
Interest expense - $
EBT - $
Taxes - $
Net income - $
Operating cash flow = EBIT + Depreciation - Taxes = - $
Chapter 2
Questions 14
Input area:
Sales
Costs
Other expenses
Depreciation expense
Interest expense
Taxes
Dividends
2004 New equity
Net new long-term debt
Change in fixed assets
Output area:
Income Statement
Sales - $
Costs -
Depreciation expense -
Other expenses -
EBIT 0
Interest expense - $
EBT - $
Taxes -
Net income - $
Dividends - $
Addition to retained earnings - $
a. Operating cash flow - $
b. Cash flow to creditors - $
c. Cash flow to stockholders - $
d. Cash flow from assets - $
Net capital spending -
Change in NWC - $
Chapter 2
Questions 15
Input area:
Sales
Costs
Interest expense
Tax rate
Dividends paid
Addition to retained earnings
Output area:
Income Statement
Sales - $
Costs -
Depreciation expense - $
EBIT 0
Interest expense - $
EBT - $
Taxes -
Net income - $
Dividends - $
Addition to retained earnings - $
Chapter 2
Questions 19
Input area:
Sales
Costs
Administrative and selling expenses
Depreciation expense
Interest expense
Tax rate
Output area:
Income Statement
Sales - $
Costs -
Administrative and selling expenses -
Depreciation expense -
EBIT 0
Interest expense - $
EBT - $
Taxes 0
a. Net income - $
b. Operating cash flow - $
c. Net income was negative because of the tax deductibility and
interest expense. However, the actual cash flow from operations
was positive because depreciation is a non-cash expense and
interest is a financing, not an operating, expense.
Chapter 2
Questions 25
Input area:
2004 2005
Sales
Depreciation
Cost of goods sold
Other expenses
Interest
Cash
Accounts receivable
Short-term notes payable
Long-term debt
Net fixed assets
Accounts payable
Inventory
Dividends
Tax rate
Output area:
Cash - $ Accounts payable - $
Accounts receivable - Notes payable 0
Inventory - Current liabilities - $
Current assets - $
Long-term debt - $
Net fixed assets - $ Owners' equity 0
Total assets - $ Total liab. & equity - $
Cash - $ Accounts payable - $
Accounts receivable - Notes payable 0
Inventory - Current liabilities - $
Current assets - $
Long-term debt - $
Net fixed assets - $ Owners' equity 0
Total assets - $ Total liab. & equity - $
Balance sheet as of Dec. 31, 2005
Balance sheet as of Dec. 31, 2004
Sales - $
Costs -
Other expenses -
Depreciation 0.00
EBIT - $
Interest 0.00
EBT - $
Taxes -
Net income - $
Dividends - $
Addition to retained earnings 0.00
Sales - $
Costs -
Other expenses -
Depreciation 0.00
EBIT - $
Interest 0.00
EBT - $
Taxes -
Net income - $
Dividends - $
Addition to retained earnings 0.00
2004 Income Statement
2005 Income Statement
Chapter 2
Questions 26
Input area:
2004 2005
Sales - $ - $
Depreciation 0 0
Cost of goods sold 0 0
Other expenses 0 0
Interest 0 0
Cash 0 0
Accounts receivable 0 0
Short-term notes payable 0 0
Long-term debt 0 0
Net fixed assets 0 0
Accounts payable 0 0
Inventory 0 0
Dividends 0 0
Tax rate 0% 0%
From Problem 25:
Owners' equity - $ - $
Output area:
Sales - $
Costs -
Other expenses -
Depreciation -
EBIT - $
Interest -
EBT - $
Taxes -
Net income - $
Dividends - $
Addition to retained earnings 0.00
Operating cash flow = EBIT + Depreciation - Taxes = - $
Change in NWC = 2005 NWC - 2004 NWC = 0.00
Net capital spending = 2005 NFA - 2004 NFA + Depreciation = 0.00
Cash flow from assets = OCF - Change in NWC - Net capital spending = - $
Net new long-term debt = 2005 long-term debt - 2004 long-term debt = - $
2005 Income Statement
Cash flow to creditors = Interest - Net new long-term debt = - $
Net new equity = 2005 OE - 2004 OE - 2005 Addition to retained earnings = - $
Cash flow to stockholders = Dividends - Net new equity = - $