Exhibit A (M = Thousand and MM = Million. Please show all work when putting into
ID: 2331148 • Letter: E
Question
Exhibit A (M = Thousand and MM = Million. Please show all work when putting into the income statement).
Based on the following information, compile an Income statement for the year ending '08.
1) Volume for the year totaled 5MM gallons. Sales price was $1.80 per gallon
2)
Corporation, in '08, purchased equipment for $150M. Equipment will be depreciated via
5 year MACRS method
3)
Land purchased in 1990 for $200M now has an appraised value of $800M
4)
Company's Gross Profit Percentage for year ending '07 was 7%; for year ending '08 the
Gross Profit Percentage was 8%
5)
Company borrowed money from First Bank on 6/30/08. The loan totaled $850M. The interest
rate was fixed at 9%.
6)
Due to price increases ('08 vs. '07); Accounts Receivable have increased by $100M
7)
Company has no Preferred Stock. The company did elect to pay a dividend of $100M to the
Common Shareholders. There are 50M shares of common stock outstanding as of 12/31/08.
8)
Corporation, in '06, purchased equipment for $75M. This equipment will be depreciated via
7 year MACRS.
9)
Company was in the 35% tax bracket in '06 & '07. In '08, the company is in the 40 % tax bracket.
10)
One of the owners borrowed $150M from the business on 9/30/08. Terms are 5 years, with
Interest only to be paid in years 1 & 2. The agreed interest rate is 10%.
11)
Company repaid $200M on long term debt in '08. Interest relating to this debt totaled $15M.
12)
Selling & General Administrative Expenses totaled 4.5% of Sales
13)
Company was unable to collect Accounts Receivable totaling $50M. They have elected to
treat this as a bad debt expense in '08.
14)
Company was able to collect $20M from a bad debt expense (written off in '06) in '08.
Exhibit A (M = Thousand and MM = Million. Please show all work when putting into the income statement).
Based on the following information, compile an Income statement for the year ending '08.
1) Volume for the year totaled 5MM gallons. Sales price was $1.80 per gallon
2)
Corporation, in '08, purchased equipment for $150M. Equipment will be depreciated via
5 year MACRS method
3)
Land purchased in 1990 for $200M now has an appraised value of $800M
4)
Company's Gross Profit Percentage for year ending '07 was 7%; for year ending '08 the
Gross Profit Percentage was 8%
5)
Company borrowed money from First Bank on 6/30/08. The loan totaled $850M. The interest
rate was fixed at 9%.
6)
Due to price increases ('08 vs. '07); Accounts Receivable have increased by $100M
7)
Company has no Preferred Stock. The company did elect to pay a dividend of $100M to the
Common Shareholders. There are 50M shares of common stock outstanding as of 12/31/08.
8)
Corporation, in '06, purchased equipment for $75M. This equipment will be depreciated via
7 year MACRS.
9)
Company was in the 35% tax bracket in '06 & '07. In '08, the company is in the 40 % tax bracket.
10)
One of the owners borrowed $150M from the business on 9/30/08. Terms are 5 years, with
Interest only to be paid in years 1 & 2. The agreed interest rate is 10%.
11)
Company repaid $200M on long term debt in '08. Interest relating to this debt totaled $15M.
12)
Selling & General Administrative Expenses totaled 4.5% of Sales
13)
Company was unable to collect Accounts Receivable totaling $50M. They have elected to
treat this as a bad debt expense in '08.
14)
Company was able to collect $20M from a bad debt expense (written off in '06) in '08.
Explanation / Answer
Income Statement
for the year ending'08
($ in M)
Revenue
Sales 9000
Interest Revenue 3.75
Total Revenue 9003.75
Cost of goods sold 8280
Gross Profit 720
Expenses
Bad Debt 50
Depreciation on Equipment
5 yr MACRS 30
7 yr MACRS 13.12
Interest on Loan 38.25
Interest on Long Term Debt 15
Selling & General Administrative Expenses 405
Total Expenses 551.37
Net Income before Tax 168.63
Income Tax 67.45
Income from continuing operations 101.18
Below the line items
Bad debts recovered of "06 20
Net Income 121.18
Notes
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