Hendrix Car Parts, Inc. has working capital of $450,000, but wishes to justify more to avoid exposure to the accumulated earnings tax. The following facts are known about the business: Cost of goods sold Accounts payable Net sales Purchases Inventory Accounts receivable $1,350,000 250,000 1,720,000 920,000 550,000 370,000 510,000 Miscellaneous expenses (including taxes of $66,000 and depreciation of $92,000) May Hendrix Car Parts, Inc. justify an increase in working capital? Hendrix has $143,000 of accumulated earnings tax payable. Using the maximum reasonable needs of the business that can be established for the year, at what after-tax income would the AET disappear?

Hendrix Car Parts, Inc. has working capital of $450,000, but wishes to justify more to avoid exposure to the accumulated earnings tax. The following facts are known about the business: Cost of goods sold Accounts payable Net sales Purchases Inventory Accounts receivable $1,350,000 250,000 1,720,000 920,000 550,000 370,000 510,000 Miscellaneous expenses (including taxes of $66,000 and depreciation of $92,000) May Hendrix Car Parts, Inc. justify an increase in working capital? Hendrix has $143,000 of accumulated earnings tax payable. Using the maximum reasonable needs of the business that can be established for the year, at what after-tax income would the AET disappear?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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