Use the information below to create (If possible) 3-years of an income statement
ID: 2601612 • Letter: U
Question
Use the information below to create (If possible) 3-years of an income statement and a cash flow statement. Not all items listed below will appear on these two statements, though they may be necessary to create the statements.
Sales: $1,000,000 in Y1, increasing at 15%/year
Depreciation Expense: $60,000/year (straight-line)
Retained Earnings: $200,000 Y0.
A/P: $70,000 Y1; $50,000 Y2, and $30,000 Y3
CapEx: $70,000/year
COGS: 40% of sales each year
Patents: $50,000
SG&A: 25%of sales Y1, 20% of sales Y2, and 15% of sales Y3
Common Stock: $400,000
Inventory: $50,000 Y1, $100,000 Y2, $300,000 Y3
R&D: $30,000/year
A/R: $10,000 Y1; $25,000 Y2; $50,000 Y3
Notes Payable: $150,000 Y1. No additional financing added in Y2 or Y3
PPE $400,000 Y1, $470,000 Y2, $540,000 Y3
Tax rate 35%
Explanation / Answer
INCOME STATEMENT Y1 Y2 Y3 SALES 1000000 1150000 1322500 LESS COGS (40%*SALES) 400000 460000 529000 GROSS PROFIT (A) 600000 690000 793500 LESS SG&A 250000 287500 330625 LESS DEPRICIATION 60000 60000 60000 INCOME BEFORE TAX (B) 290000 342500 402875 LESS TAX@35% ON B 101500 119875 141006.3 INCOME AFTER TAX 188500 222625 261868.8 Y1 Y2 Y3 CASH FLOW STATEMENT NET INCOME BEFORE TAX 260000 312500 372875 ADD DEPRICIATION 60000 60000 60000 ADD INCREASE IN CURRENT LAIBILITY & DECREASE IN CA LESS DECREASE IN C.L &INCREASE IN C.A INVENTORY 0 -50000 -200000 ASSUME THE AMOUNT IN Y1 IS SAME AS Y0 OTHERWISE WE WILL TAKE Y1 AMOUNT( POSITIVE ) A/P 0 -20000 -20000 A/R 0 -15000 -25000 LESS TAX PAID -91000 -109375 -130506 ASSUME TAX IS ACTUALLY PAID CASH FLOE FROM OPERATING ACTIVITY (A) 229000 178125 57368.75 INCREASE IN PPE 0 -70000 -70000 CAP EX -70000 -70000 -70000 CASH FLOW FROM INVESTING ACTIVITY -70000 -140000 -140000 NOTE PAYBLE - - - CASH FLOW FROM FINANCING ACTIVITY - - 0
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