Question

For questions #6-18, refer to the following financial information for Low 2018 2019 BALANCE SHEET: Assets: Cash Accounts Receivable Inventory Fixed Assets, net Total Assets $145,000 $185,000 475,000 572,000 325,000 310,000 400,000 495,000 $1,345,000 $1,562,000 Liabilities and Equity Accounts Payable Long-term Debt Common Stock Retained Earnings Total Liabilities and Equity $337,000 525,000 50,000 433,000 $1,345,000 $378,000 605,000 70,000 509,000 $1,562,000

Answer 1

0) $ 20,000 (as the common stock has increased by $20,000 in 2019 in comparison to 2018).

1) As the retained earnings has increased by $ 76,000 in 2019 in comparison to 2018 whereas the profits for 2019 was $ 266,400 so we can easily conclude that $ (266,400-76000) = $ 190,400 has been paid as dividend to Lowery's shareholders.

2) Effective annual average tax rate (2019)= (Tax expenses/ Income before taxes)*100

= (103600/370000)*100= 28%

3) Earning per share= Net Income/ Weighted average number of shares outstanding= $266400/16000= $16.65

4) Capital Spending in 2019= Closing balance on 2019+ Depreciation during the year-Opening balance on 2018

=$ (495000+95000-400000)= $190000

5) Operating cashflows= Net income+ Non cash expenses-Increase in working capital= $464000 (see working below)

$

Earning before interest and taxes 410000

Add: Depreciation 95000

Less: Increase in debtors 97000

Add: Decrease in inventory 15000

Add: Increase in payables 41000

6) Investment in working capital (2019)= Current assets- Current liabilities= $(185000+572000+310000-378000)= $ 689000

7) Cashflow to creditors= Interest paid-Closing long term debts+ opening long term debts

$(40000-605000+525000) = $ 40000

8) Cashflow to stockholders= Cash dividend paid=$ 190,400 (assuming all dividend are paid in cash)