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Chapter 2. 2-14
a. Cumberland Industries' most recent sales were $455,000,000; operating costs (excluding
depreciation) were equal to 85% of sales; net fixed assets were $67,000,000; depreciation amounted to
10% of net fixed assets; interest expenses were $8,550,000; the state-plus-federal corporate tax rate was
40% and Cumberland paid 25% of its net income out in dividends. Given this information, construct
Cumberland's income statement. Also calculate total dividends and the addition to retained earnings.
The input information required for the problem is outlined in the "Key Input Data" section below. Using this
data and the balance sheet above, we constructed the income statement shown below.
Common dividends
Addition to retained earnings
b. Cumberland Industries' partial balance sheets are shown below. Cumberland issued $10,000,000 of
new common stock in the most recent year. Using this information and the results from part a, fill in the
missing values for common stock, retained earnings, total common equity, and total liabilities and
equity.
c. Construct the statement of cash flows for the most recent year.
Operating Activities
Net Income
Adjustments:
Noncash adjustment:
Depreciation
Due to changes in working capital:
Due to change in accounts receivable
Due to change in inventories
Due to change in accounts payable
Due to change in accruals
Net cash provided (used) by operating activities
Investing Activities
Cash used to acquire gross fixed assets
Due to change in short-term investments
Net cash provided (used) by investing activities
Financing Activities
Due to change in notes payable
Due to change in long-term debt
Due to change in common stock
Payment of common dividends
Net cash provided (used) by financing activities