Chapter 2

1. Beakman Inc. has sales of $933,000, costs of $367,000, depreciation expense of $82,000, interest
expense of $47,325, and a tax rate of 21%. What is the net income of this firm?

2. Suppose the firm in problem 1 paid out $35,000 in cash dividends. What is the addition to
retained earnings?

3. The Smith Co. had $285,922 in 2017 taxable income. Using the rates from table 2.3 in the
chapter, calculate the company’s 2017 income taxes. What would the 2018 taxes be assuming they had
the same amount of taxable income ($285,922)?

4. In problem 3, for 2017, what is the average tax rate? What is the marginal tax rate?
 Chapter 3

1. Smith, Inc. has net working capital of $1,890, current liabilities of $4,440, and inventory of $3,300.
What is the current ratio? What is the quick ratio?

2. Vitron, Inc., has sales of $16.8 million, total assets of $14.7 million, and total debt of $7.2 million. If
the profit margin is 5%, what is net income? ROA? ROE?

3. Beakman Inc. has a current accounts receivable balance of $521,548. Credit sales for the year ended
were $5,880,000. What is the receivables turnover? The days’ sales in receivables? How long did it take
on average for credit customers to pay off their accounts during the past year?

4. The Mister Mustard Corporation has ending inventory of $620,000, and a cost of goods sold for the
year ended $4,710,000. What is the inventory turnover? The days’ sales in inventory? How long on
average did a unit of inventory sit on the shelf before sold?
 Chapter 11

1. The Watch Shop, Inc. makes watches. The variable materials cost $9.65 per unit. The variable labor
cost is $8.35 per unit.

a. what is variable cost per unit

b. suppose Watch Shop has fixed costs of $700,000 during the year in which its total production is
150,000 units. What are the total costs for the year?
c. If the selling price is $79.99 per unit. Does Watch Shop break even on a cash basis? If
depreciation is $320,000 per year, what is the accounting break-even point?

2. Home Security, Inc. can manufacture security cameras for $32.37 in variable raw material costs and
$24.00 in variable labor expense. The cameras sell for $100. Last year, production was 100,000
pairs. Fixed costs were $1,200,000. What were total production costs? What is the marginal cost
per pair? What is the average cost? If the company is considering a one-time order for an extra
3.000 cameras, what is the minimum acceptable total revenue from the order.
 Chapter 20

1. You place an order of 400 units of inventory at a unit price of $200. The supplier offers terms of
2/10 Net 40.

a. How long do you have to pay before the account is overdue? If you take the full period, how
much should you remit?
b. What is the discount being offered? How quickly must you pay to get the discount? If you take
the discount, how much should you remit?
c. If you don’t take the discount, how much interest are you paying implicitly? How many days’
credit are you receiving?

2. Beakman, Inc. has annual sales of $18 million. The Average Collection Period is 30 days. What is
the average investment in accounts receivable as shown on the balance sheet?