Question

(Working with the income statement) At the end of its third year of operations, the Sandifer Manufacturing Co. had $4,510,000 in revenues, $3,373,000 in cost of goods sold, $459,000 in operating expenses which included depreciation expense of $147,000, and a tax liability equal to 34 percent of the firm's taxable income. Sandifer Manufacturing Co. plans to reinvest $44,000 of its earnings back into the firm. What does this plan leave for the payment of a cash dividend to Sandifer's stockholders? Complete the income statement for Sandifer Manufacturing Co.: (Round to the nearest dollar.) Revenues = Less: Cost of Goods Sold = $ | Equals: Gross Profit = SO Less: Operating Expenses = $ Equals: Net Operating Income = $ Less: Interest Expense = Equals: Earnings before Taxes = $ Less: Income Taxes = Equals: Net Income =

Answer 1

Income Statement Revenues Less: Cost of goods sold Gross profit Less: Operating expenses (including Depreciation) Net Operating Income Less: Interest Earnings Before Taxes (EBT) Less: Income Taxes @ 34% of EBT Net Income 4,510,000 3,373,000 1,137,000 459,000 678,000 678,000 230,520 447,480 | Calculation of Amount available for payment of cash dividendi Net Income 447,480 Add Back Depreciation* 147,000 Total 594,480 Less: Amount Reinvested 44,000 Amount Available to pay cash dividends 550,480 *Depreciation is added back because it is not a cash expense