Year 2 | ||||||||||
Year 1 | (Forecasted) | Workings | ||||||||
Net Sales | $ 25,000,000.00 | $ 31,250,000.00 | Note | |||||||
Less: | Operating costs, except depreciation and amortization | $ 20,000,000.00 | $ 25,000,000.00 | |||||||
Less: | Depreciation and amortization | $ 1,000,000.00 | $ 1,000,000.00 | |||||||
Operating income (or EBIT) | $ 4,000,000.00 | $ 5,250,000.00 | ||||||||
Less: | Interest expense | $ 400,000.00 | $ 787,500.00 | ($ 4462500 x 15/85) | ||||||
Pre-tax income (or EBIT) | $ 3,600,000.00 | $ 4,462,500.00 | ($ 2677500 + $ 1785000) | |||||||
Less: | Taxes (40%) | $ 1,440,000.00 | $ 1,785,000.00 | ($ 2677500 x 40/60) | ||||||
Earnings after taxes | $ 2,160,000.00 | $ 2,677,500.00 | ($ 2477500 + $ 200000) | |||||||
Less: | Preferred stock dividends | $ 200,000.00 | $ 200,000.00 | (given) | ||||||
Earnings available to common stockholders | $ 1,960,000.00 | $ 2,477,500.00 | ($ 1674250 + $ 803250) | |||||||
Less: | Common stock dividends | $ 648,000.00 | $ 803,250.00 | (given) | ||||||
Contribution to retained earnings | $ 1,312,000.00 | $ 1,674,250.00 |
Note | ||
Let net sales be x | ||
Therefore, Operating costs = 0.8x | ||
So, x - 0.8x - $ 1000000 = $ 5250000 | ||
0.2x = $ 6250000 | ||
x = $ 31250000 | ||
Net sales = $ 31250000 | ||
Operating costs = $ 31250000 x 0.8 | ||
= | $ 25,000,000.00 |
ear 2 income statement data for Fuzzy Button, then answer the questions that follow. Be sure...
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