Please answer only Number 3. Cash Flow, use question 2 and question 2 as reference for question number 3. Thank you.

Please answer only Number 3. Cash Flow, use question 2 and question 2 as reference for question number 3. Thank you.

2. Income Statement and Taxes a) Find the missing values for the income statement below: Fresno Cleaners 2018 Income Statement Net sales $ 68,700 Cost of goods sold 51,300 Depreciation 4,600 EBIT Interest paid 1,225 Earnings before taxes ? Taxes 32% Net income ? Dividends paid 3,400 Addition to retained earnings ? b) If a firm has $300,000 in taxable income in both 2017 and 2018: What is the firm's tax liability for each year? What is the average tax rate for each year? What is the marginal tax rate for each year? 3. Cash Flow In 2017 Fresno Cleaners' balance shows: current assets is 34,500, fixed assets is 80,000, current liabilities is 20,300, long-term debt is 55,600, equity is 38,600. The 2018 balance sheet shows: current assets is 36,100, fixed assets is 82,300, current liabilities is 23,200 long-term debt is 51,100, equity is 44,100. Fresno Cleaners 2018 Income Statement Net sales Cost of goods sold Depreciation EBIT Interest paid Earnings before taxes Taxes 32% Net income Dividends paid Addition to retained earnings $ 68,700 51,300 4,600 ? 1,225 ? ? 3,400 ? Fresno Cleaner 2018 Income Statement a) Amount Net Sales $ 68,700 cost of goods sold $ 51,300 Depreciation $ 4,600 EBIT= Net Sales - Cost of good sold - Depreciation $ 12,800 Interest Paid $ 1,225 Earning before Tax = EBIT -Interest $ 11,575 Taxes 32% = Earning before Tax * Tax Rate $ 3,704 Net Income = Earning before Tax - Tax $ 7,871 Dividends Paid $ 3,400 Addition to retain earning - Net Income - Dividend paid $ 4,471 b If a firm have $300,000 in taxable income in both 2017 & 2018 The Tax liability for the firm, assuming the tax rate is 32% as per above income statement i Tax Liability = Taxable Income * Tax Rate = 300,000 * 32% = $96,000 ii Average Tax Rate= Total Liability/Taxable Income = $96,000/$300,000 = 32% Marginal Tax Rate is tax rate applicable over income over certain dollar value incase of a iii progressive tax rate structure, since there is only one tax rate here. It will be 32%