Answered: South Sea Baubles has the following…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 52E: Juroe Company provided the following income statement for last year: Juroes balance sheet as of...

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South Sea Baubles has the following (incomplete) balance sheet and income statement.

Assets	2021	2022	Liabilities and Shareholders' Equity	2021	2022
BALANCE SHEET AT END OF YEAR
(Figures in $ millions)
Current assets	$ 101	$ 195	Current liabilities	$ 72	$ 93
Net fixed assets	910	1,010	Long-term debt	655	860

INCOME STATEMENT, 2022
(Figures in $ millions)
Revenue	$ 2,005
Cost of goods sold	1,085
Depreciation	405
Interest expense	251

a&b. What is shareholders’ equity in 2021 and 2022?

c&d. What is net working capital in 2021 and 2022?

e. What are taxes paid in 2022? Assume the firm pays taxes equal to 21% of taxable income.

f. What is cash provided by operations during 2022?

g. Net fixed assets increased from $910 million to $1,010 million during 2022. What must have been South Sea’s gross investment in fixed assets during 2022?

h. If South Sea reduced its outstanding accounts payable by $46 million during the year, what must have happened to its other current liabilities?

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