(2-14) Begin with the partial model in the file Ch02 P14 Build a Model.xls on the textbook’s Web site.
a. Cumberland Industries’s 2010 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 2010 income statement. Also calculate total dividends and the addition to retained earnings. (Hint: Start with the partial model in the file and report all dollar figures in thousands to reduce clutter.)
b. Cumberland Industries’s partial balance sheets are shown below. Cumberland issued $10,000,000 of new common stock in 2010. Using this information and the results from a part a, fill in the missing values for common stock, retained earnings, total common equity, and total liabilities and equality.
Cumberland Industries: Balance Sheets as of December 31 (Thousands of Dollars)
Cash $91,450 $74,625
Short-term investments 11,400 15,100
Accounts receivable 108,470 85,527
Inventories 38,450 34,982
Total current assets $249,770 $210,234
Net fixed assets 67,000 42,436
Total assets $316,770 $252,670
Liabilities and Equity
Accounts payable $30,761 $23,109
Accruals 30,405 22,656
Notes payable 12,717 14,217
Total current liabilities $73,883 $59,982
Long-term debt 80,263 63,914
Total liabilities $154,146 $123,896
Common stock ? $90,000
Retained earnings _____? 38,774
Total common equity ? $128,774
Total liabilities and equity _____? $252,670
c. Construct the statement of cash flows for 2010.
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