# David Chan operates Speedy Delivery Service Company, a fleet of delivery trucks in a large metropolitan area, and has just

## Question:

David Chan operates Speedy Delivery Service Company, a fleet of delivery trucks in a large metropolitan area, and has just completed his first full year in business. During the year, the company billed \$420,000 for delivery services. David has a total of 11 employees (10 truck drivers and a clerical assistant). In addition to his own monthly salary of \$5,000, David paid annual salaries of \$12,100 and \$10,000 to each of the truck drivers and the clerical assistant, respectively. Employment taxes and benefit costs for David and his employees totaled \$42,600 for the year. Sundry expenses, including office supplies, totaled \$12,400 for the year. In addition, David spent \$22,000 during the year on tax-deductible travel and entertainment associated with client visits and new business development. Lease payments for the rented office space (a tax deductible expense) were \$2,800 per month. Depreciation expense on the office furniture and delivery trucks was \$16,300 for the year. During the year, David paid an interest of \$18,000 on the \$150,000 borrowed to start the business. The company was subject to an average tax rate of 40% during 2014.
a. Prepare an income statement for Speedy Delivery Service Company for the year ended December 31, 2014.
b. Evaluate the financial performance of the company in 2014.

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Related Book For

## Principles Of Managerial Finance

ISBN: 9781292018201

14th Global Edition

Authors: Lawrence J. Gitman, Chad J. Zutter

Question Details
Chapter # 3- Financial Statements and Ratio Analysis
Section: Problem
Problem: 3
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