If firm A sells products whose value is 10 million and the value is not paid in cash. The firm A will get cash in the future. In this case, which item in the balance sheet will increase and which item in the balance sheet will decrease?

Rutgers University FINANCE Hengguo Da

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Assignment 1 Due date:11:30 am June 11 2018

Instructions: You will have to answer three problems; The first has 5 credits, the second

has 10 credits, and the third has 10 credits. The total credits are 25 credits. You should

write down necessary steps to solve problems. Only final correct answers in every

problem will not get full credits.

1. Tax Calculation (5 credits)

The firm C has taxable income 76000.

Taxable Income Tax Rate

0 50000 0.15

50001 75000 0.25

75001 100000 0.34

100001 335000 0.39

335001 10000000 0.34

(1) Based on tax table above, please find marginal tax rate for firm

C. (2 credits)

(2) According to tax table above, please calculate total tax of firm C

and average tax rate for Firm c. (3 credits)

2. Balance sheet (10 credits)

The following statement is the balance sheet of firm A.

Balance Sheet of Firm A(units: million)

Current Asset: Current Liabilities:

Cash and Equivalents 100 Accounts payable

Accounts Receivable Total Current Liabilities 186

Inventory 78

Total Current Assets Long Term Liabilities:

Deferred Taxes

Fixed Assets: Long Term debt 137

Property,Plant,and equipment Total Long Term Liability 157

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Less Accumulated Depreciation 420

Net Property,plant,and Equipment Stockholders’ Equity:

Preferred Stock 39

Intangible Assests and Others 244 Common Stock 55

Total Fixed Assets 502 Capital Surplus 147 Accumulated Retained Earnings 190

Total Assets Less Treasury Stock 26 Total Equity 405

Total Liabilities and Equity

(1) According accounting rules and accounting equation to fill red box

(5 credits).

(2) If firm A sells products whose value is 10 million and the value is

not paid in cash. The firm A will get cash in the future. In this case,

which item in the balance sheet will increase and which item in the

balance sheet will decrease? (5 credits)

3. Financial Cash flow and statement of cash flows (10

credits)

You are researching Time Manufacturing and have found the following

accounting statement of cash flows for the most recent year. You also

know that the company paid $84 million in current taxes and had an

interest expense of $41 million.

Statement of Cash flows(units:million)

Operation

Net income 192

Depreciation 76

Deferred Taxes 13

Change in Assets and liabilities

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Acccounts receivable -16

Inventories 17

Accounts payable 13

Accrued Expenses -7

Other 2

Total cash flow from operation 290

Investing activities

Acquisition of fixed assets -198

Sale of fixed assets 21

Total cash flow from investing activities -177

Financing Activities

Retirement of long-term debt -150

proceeds from long-term debt sales 115

change in notes payable 8

Dividends -81

Repurchase of stock -11

Proceeds from long-term debt sales 43

Total cash flow from financing activities -76

change in cash(balance sheet) 37

(1) Use information above :interest expenses, current tax and statement of

cash flow to compute financial cash flow(5 credits).(hint: please first

calculate cash flows from three parts and then sum them)

(2) Based on Statement of cash flow, please calculate the cash flow for

shareholders and cash flow for debtholders. Based on Calculation, write

down the equation about Cash flow for different stakeholders. (5 credits)

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