Financial Statements In Class Problems 1. Cox Corporation recently reported an EBITDA of $22.5 million and $5.

4 million of net income. The company has $6 million interest expense and the corporate tax rate is 35%. What was the companys depreciation and amortization expense?

2.

On its 2010 balance sheet, Sherman Books had retained earnings equal to $510 million. On its 2011 balance sheet, retained earnings were also equal o $510 million. Which of the following statements is most correct? a. The company must have had net income equal to zero in 2011. b. The company did not pay dividends in 2011. c. If the companys net income in 2011 was $200 million, dividends paid must have also equaled $200 million. d. If the company lost money in 2011, it must have paid dividends.

3.

Below are the 2009 and 2010 year-end balance sheets for Kewell Products: Assets: Cash Accounts receivable Inventories Total current assets Net fixed assets Total assets Liabilities and equity: Accounts payable Notes payable Total current liabilities Long-term debt Common stock Retained earnings Total common equity Total liabilities and equity 2010 $ 100,000 432,000 1,000,000 $1,532,000 3,000,000 $4,532,000 $ 700,000 800,000 $1,500,000 1,200,000 1,500,000 332,000 $1,832,000 $4,532,000 2009 $ 85,000 350,000 700,000 $1,135,000 2,800,000 $3,935,000 $ 545,000 900,000 $1,445,000 1,200,000 1,000,000 290,000 $1,290,000 $3,935,000

Kewell Products has never paid a dividend on its common stock, and it issued $1,200,000 of 10-year non-callable, long-term debt in 2009. As of the end of 2010, none of the principal on this debt had been repaid. Assume that the companys sales in 2009 and 2010 sales were the same. Which of the following statements must be CORRECT? a. b. c. d. Kewell had negative net income in 2010. Kewell issued new common stock in 2010. Kewell issued long-term debt in 2010. Kewell repurchased some common stock in 2010.

4.

At the end of 2009, Lehnhoff Inc. had $75 million in cash. During 2010, the following events occurred: Cash flow from Lehnhoffs operating activities totaled $325 million. Lehnhoff issued $500 million in common stock. Lehnhoffs notes payable decreased by $100 million. Lehnhoff purchased fixed assets totaling $600 million. How much cash did Lehnhoff Inc. have at the end of 2010?

5.

Holmes Aircraft recently announced that its net income increased sharply from the previous year, yet its net cash flow from operations declined. Which of the following could explain this performance? a. b. c. d. e. The companys interest expense increased. The companys depreciation and amortization expenses declined. The companys operating income declined. The companys non-cash expenses increased. The companys cost of goods sold increased.