1.4 You are a summer intern at the office of a localcorporation. To text your ba
ID: 2770554 • Letter: 1
Question
1.4 You are a summer intern at the office of a localcorporation. To text your basic knowledge of financialstatements, your manager gives the following list of accounts andasks you to prepare a simple income statement using thoseaccounts.
Accounts
$000,000
Depreciation
25
General and Administrative Expenses
22
Sales
345
Sales Expenses
18
Cost of Goods Sold
255
Lease expense
4
Interest Expense
3
a. Arrange the accounts into an income statement. Labeland solve for gross profit, Operating Profit, and Net profit beforetaxes.
b. Using a 35% tax rate, calculate taxes paid and net profit aftertaxes.
c. Assuming a dividend of $1.10 per share with 4.25 million sharesoutstanding, calculate EPS and additions to retained earnings.
Accounts
$000,000
Depreciation
25
General and Administrative Expenses
22
Sales
345
Sales Expenses
18
Cost of Goods Sold
255
Lease expense
4
Interest Expense
3
Explanation / Answer
INCOME STATEMENT
INCOME STATEMENT
(a) Amount ($000,000) Amount ($000,000) Sales 345 Cost of Goods Sold (255) Gross Profit 90 Opetaing Expenses: Sales expenses (18) General & Administrative Expenses (22) Lease Expenses (4) Depreciation (25) (69) Operating Profit 21 Interest Expenses (3) Net Profit before Taxes 18 (b) Income Tax (35%) (6.30) Net Profit after Taxes 11.70 Dividends ($1.10 * 4.25 million shares) 4.675 Retained Earnings 7.025 ( c) Earning Per share (EPS) Net Income / Outstanding shares 11.7 / 4.25 million shares Earnign Per Share (EPS) 2.75Related Questions
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