Question

PLEASE SHOW ALL WORK.

1. The financial statements of Bruce’s Antiques reflect cash of $21,300, collectible accounts receivable of $37,700, accounts payable of $45,900, inventory of $63,300, long-term debt of $80,000, and net fixed assets of $123,400. The firm estimates that if they wanted to cease operations today that they could sell the inventory for $48,000 and the fixed assets for $99,000. What is the market value of the assets?

2. Fields and Flowers had beginning retained earnings of $63,100. During the year, the company reported sales of $127,800, costs of $89,900, depreciation of $11,200, dividends of $2,800, and interest paid of $3,400. The tax rate is 35%. What is the retained earnings balance at the end of the year?

3. Sunny Beach Chair Company had $520,000 in 2019 taxable income. Using the following Corporate Tax Table, calculate the company’s actual 2019 taxes paid.

                                                 Corporate Marginal Tax Rates

                       

                                    Taxable Income                              Tax Rate

                               $             0-         50,000                           15%

                                     50,001-         75,000                           25

                                     75,001-       100,000                           34

                                   100,001-       335,000                           39

                                   335,001- 10,000,000                           34

4. The Caulkins Co. is considering a project that will produce cash inflows of $36,000 in year one, $54,800 in year two, and $72,900 in year three. What is the present value of these cash inflows if the company assigns the project a discount rate of 14 percent?

5. At the end of this month, you will start saving $150 a month for retirement through your company’s retirement plan. Your employer will contribute an additional $.50 for every $1.00 you save. If you are employed by this firm for 30 more years and earn an average 12 percent on your retirement savings, how much will you have in your retirement account 30 years from now?

Answer 1

1. Firm estimates that  if they wanted to cease operations today value of the inventory and fixed assets are changed from carrying amounts.

therefore market value of the assets:

cash	$ 21300
accounts receivables	$ 37700
Inventory	$ 48000
Fixed assets	$ 99000
Total	$ 206000

2.

sales	$127,800
Less: costs of goods sold	$89,900
Less: Depreciation	$11,200
Less: Interest paid	$3,400
Net Profit	$23,300
Less: Tax @ 35%	$8,155
Profit after tax	$15,145
Add: Dividends (not Taxable)	$2,800
Total Profits	$17,945
Add: retained earnings	$63,100
Closing retained earnings	$81,045

3.

Taxable Income ($)	Tax Rate	Tax
0- 50,000	15%	7500
50,001- 75,000	25%	6250
75,001- 100,000	34%	8500
100,001- 335,000	39%	91650
335,001- 10,000,000	34%	62900
Total tax payable		$1,76,800

4. Present value of cash inflows:

year	cash in-flows	present value factor @ 14%	present value
1	36000	36000*1/1.14=0.877	$31,572
2	54800	54800*(1/1.14)2=0.769	$42,141
3	72900	72900*(1/1.14)3=0.675	$49,208
	Total		$1,22,921

(rounded off to nearest $)

5.Total contribution = $150 + (0.50*$150) = $225

Retirement amount 30 years from now : Future value = Present value x

  FV = $ 225 x

FV = $225 x 3493.84

FV = $ 7,86,114