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CH 4 BUS 370 REVIEW EXAM QUESTIONS WITH VERIFIED ANSWERS – UPDATED!!

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CH 4 BUS 370 REVIEW EXAM QUESTIONS WITH VERIFIED ANSWERS – UPDATED!! A new recording studio will generate additional earnings which will be applicable to marginal tax rate (marginal tax rate is the proportion of additional income that goes to taxes). Depreciation: - Answer-is a tax deductibl...

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  • September 28, 2024
  • 6
  • 2024/2025
  • Exam (elaborations)
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CH 4 BUS 370 REVIEW EXAM QUESTIONS
WITH VERIFIED ANSWERS – UPDATED!!
A new recording studio will generate additional earnings which will be applicable to
marginal tax rate (marginal tax rate is the proportion of additional income that goes to
taxes).

Depreciation: - Answer-is a tax deductible non-cash expense

Given the following information, calculate earnings per share. Round to the nearest
cent.

Earnings before depreciation, interest, and taxes
$1,600,000

Depreciation
$100,000

Tax rate
40%

Interest expense
$10,000

Common dividends paid
$200,000

Number of shares of common stock outstanding
$500,000 - Answer-Earnings before depreciation, interest, and taxes 1600000
EBIT $1,500,000
-Interest $10,000
EBT $1,490,000
-Taxes $596,000
Net Income $894,000

EPS (Net Income/Number of Shares Outstanding) 1.788


EPS=1.79

Interest expense is deducted: - Answer-before taxes are calculated but after operating
expenses

Kerney's EBT is $450,000. What is the marginal tax rate based on the following table?

, Before-Tax Income (EBT)
Tax Rate

$0 - $50,000
15%

$50,001 - $75,000
25%

$75,001 - $100,000
34%

$100,001 - $335,000
39%

$335,001 - $10,000,000
34%

$10,000,001 - $15,000,000
35%

$15,000,001 - $18,333,333
38%

Over $18,333,333
35% - Answer-Kerney's EBT is $450,000 and falls into $335,001 - $10,000,000 with
34% range. For $1 extra earnings, Kerney has to pay 34% tax (marginal tax rate).

=34%

Pertana Corporation is a manufacturer of automobile parts located in Greenville, South
Carolina. At the end of the current fiscal year, the company had net working capital of
$157,903. The company showed accounts payables of $94,233, accounts receivables
of $83,112, inventory of $171,284, and cash and marketable securities of $12,311.
What amount of notes payables does the firm have? - Answer-Total current assets =
$12,311 + $83,112 + $171,284 = $266,707

Net working capital = $266,707 - Total current liabilities = $157,903,

Total current liabilities = $266,707 - $157,903 = $108,804

Total current liabilities = $108,804
= Accounts payables + Notes payables, Notes payables = $108,804 - $94,233 =
$14,571

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