Finc 3131 Ch. 2 Hw Questions Study Guide Rated A+

Draiman, Inc., has sales of $596,000, costs of $262,000, depreciation expense of $65,500, interest expense of $32,500, and a tax rate of 40 percent. What is the net income? {Ans: Net income $ 141,600 Sales 596,000 -Costs (262,000) -Depreciation (65,500) =EBIT 268,500 -Interest (32,500) =Taxable Inc. 236,000 Taxes (40%) 94,400 (236,000*40%) =Net Income 141,600}The matching principle states that: {Ans: the costs of producing an item should be recorded when the sale of that item is recorded as revenue.}Over the past year, a firm decreased its current assets and increased its current liabilities. As a result, the firm's net working capital: {Ans: had to decrease.}Draiman, Inc., has sales of $603,000, costs of $255,000, depreciation expense of $62,000, interest expense of $29,000, and a tax rate of 30 percent. The firm paid out $45,000 in cash dividends. What is addition to retained earnings? {Ans: Addition to retained earnings $ 134,900 Sales 603,000 -Costs (255,000) -Depreciation (62,000) =EBIT 286,000 -Interest (29,000) =Taxable Inc. 257,000 Taxes (30%) 77,100 (257,000*30%) =Net Income 179,900 Addition to retained earnings: (179,900-45,000)= 134,900}Klingon Widgets, Inc., purchased new cloaking machinery three years ago for $5.7 million. The machinery can be sold to the Romulans today for