Johnson Corp Exam I Problem

1. If the company had sales of $32,000 and a gross margin of $7,200, what is the COGS? 32,000 – 7,200= 24,800

1. If the company in the last problem had expenses of $2,000, interest of $200, and taxes of $800, what was its net income? Tax Rate is 40% 7,200- 2,000-200-800= 4,200

1. Johnson Corp purchased a machine for $20,000 six years ago.  They have been depreciating it on a straight line basis down to a salvage value of zero over its expected 20 year life.  They just sold the machine for $15,000.  Assuming a 40% tax rate, calculate the after tax cash that Johnson Corp will receive from the sale.

Depreciation $1,000/ year

Sale Price- $15000

Purchase price- $20,000

Book Value- Purchase Price- Acc. Dep.- $20000-$14000

Taxable Income- (Sale Price vs Book Value)- 15000 – 14000=$1,000

Tax Rate- 40%

After tax cash- $600

1. The following table shows the beginning and ending balances for all of the current asset and liability accounts for the past year.  What are the total sources and uses of cash resulting from changes in these accounts? Calculate the “Cash from Operating Activities”.

Changes in Working Capital

Account                                2008                        2009                        Change        

A/R                                        320                        400                        (80)

Inventory                                450                        350                        100

A/P                                        600                        720                        120                

Accruals                                85                        50                        (35)

                                                                                        $105

OPERATING ACTIVITIES:

Net Income                                900

Depr.                                        0

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