1. Forcast Year 2 and answer the following questions below.

The income statement, also known as the profit and loss (PRL) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm's cross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders The income statement is prepared using the generally accepted accounting prindples (GAAP) that match the firm's revenues and expenses to the period in which they were incurred, not necessarily when cash was received or paid. Investors and analysts use the information given in the income statement and other Mirandal statements and reports to evaluate the company's financial performance and condtion Consider the following scenario Purzy button Clothing Company's income statement reports data for its first year of operation. The film's co would like sales to increase by 259 next year 1. Furry Button is able to achieve this level of increased sales, but its interest costs increase from 10% to 15 of earnings before interest and taxes (EBIT) 2. The company's operating costs (excluding depreciation and amortization) remainot 75% of net sales and its depreciation and amortization expenses remain constant from you to yoor 3. The company's tax rate remains constant at 40% of its pre-tax income or eamings before taxes (EBT). 4. In Year 2. Fuzzy Button expects to pay $100,000 and $555.900 of preferred and common stock dividends, respectively Fuzzy Button Clothing Company income Statement for Year Ending December 31 Year 1 Year 2 (Forecasted) $10,000,000 7,500,000 400,000 400,000 $ S Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating income (or EBIT) Less: Interest expense Pre-tax income (or EBT) Less: Taxes (40%) Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Less Common stock dividends Contribution to retained earnings $2,100,000 210,000 $1,890,000 756,000 $1,134,000 100,000 $1,034,000 453,600 $580,400 5 $ $733,850 Given the results of the previous income statement calculations, complete the following statements: In Year 2, Fuzzy Button ksas 5,000 shares of preferred stock issued and outstanding, then each proferred share should expect to receive in annual dividends If Fury Button has 400.000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 1 to in Year 2 Puzzy Button's before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 1 to in Year 2 to say that Putzy Button's net inflows and outflows of cash at the end of years 1 and 2 are equal to the company's annual contribution to retained earnings, 5580,400 and 5733,850, respectively. This is because of the items reported in the income statement involve payments and receipts of cash