Question

Finance practice help​​​​​​​

Finance Practice You need to show intermediate steps. 1. Please construct a complete income statement based on the following information. Advertising expenditures Cost of goods sold Depreciation and Amortization Net sales Interest expenses R&D expenditures Repair and maintenance costs Lease and utility expense Management salary Tax rate 58,000 1,433,000 78,000 3,210,000 64,000 30,000 22,000 52,000 240,000 21% 2. For the fiscal year of 2018, Excel Sports Inc. paid out $51,000 as common dividends. Meanwhile, the retained earnings from the Balance Sheets was $297,000 in 2018 and $165,000 in 2017. How much was the net income in 2018?

Answer 1

1. Income Statement is constructed as below:

Particulars	Amount
Net Sales	3,210,000
Less: Cost of Goods Sold	(1,433,000)
Gross Profit	1,777,000
Less: Research & development expense	(30,000)
Less: Lease & utility expense	(52,000)
Less: Management Salary	(240,000)
Less: Repairs & Maintenance cost	(22,000)
Less: Advertising Expense	(58,000)
Earnings before Interest, tax, Depreciation & Amortization (EBITDA)	1,375,000
Less: Depreciation & Amortization	(78,000)
Earnings before Interest and Tax (EBIT)	1,297,000
Less: Interest Expenses	(64,000)
Earnings before Tax (EBT)	12,33,000
Less: Tax of 21%	(258,930)
Net Income	974,070

2. Net Income in 2018 is calculated by using the below formula:

Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

Beginning Retained Earnings = $ 165,000

Dividends = $ 51,000

Ending Retained Earnings = $ 297,000

By plugging these figures in the above mentioned formula, we shall get net income as follows:

= $ 165,000 + Net Income - $ 51,000 = $ 297,000

= $ 183,000

So, the net income in 2018 is $ 183,000

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