Generally Accepted Accounting Principles and Net Income

Topics: Generally Accepted Accounting Principles, Balance sheet, Depreciation Pages: 3 (734 words) Published: January 22, 2013
1. Arredondo, Inc. has current assets of $2,170, net fixed assets of $9300, current liabilities of $1350, and long-term debt of $3980. Building a balance sheet for this company, address the following questions:

a. What is the value of the shareholders’ equity account for this firm? b. How much is net working capital?

Arredondo,IncBalance Sheet|
Assets Liabilities and Owener`s EquityCurrent assets $2,170 Current liabilities $1350Net fixed assets $9,300 Long-term debt $3980 Shareholders` equity $6140Total assets $11470 Total liabilities and shareholders` equity $11470|

Net working capital= $2170-1350=$820

2. Lifeline, Inc. has sales of $585,000, costs of $273,000, depreciation expense of $71,000, interest expense of $38,000, and a tax rate of 35 percent. Building an income statement for this company, what is the net income?

Lifeline, IncIncome Statement|
Net sales $585,000 Cost $273,000------------------------------------------------- Depreciation $71,000Earnings before interest and taxes $241,000------------------------------------------------- Interest paid $38,000Taxable income $203000Taxes $71050Net income $131950|

3. The SGS Co. had $275,000 in taxable income. Using the rates from Table 2.3 in the chapter, address the following:

a. What is the company’s income taxes?
b. What is the company’s average tax rate?
c. What is the company’s...
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