You are a summer intern at the office of a local tax preparer. To test your basic knowledge of financial statements, your manager, who graduated from your alma mater 2 years ago, gives you the following list of accounts and asks you to prepare a simple income statement using those accounts.
Accounts ($000,000)
Depreciation ............. 25
General and administrative expenses .. 22
Sales ................ 345
Sales expenses ............ 18
Cost of goods sold ......... 255
Lease expense ........... 4
Interest expense ........... 3
a. Arrange the accounts into a well-labeled income statement. Make sure you label and solve for gross profit, operating profit, and net profit before taxes.
b. Using a 35% tax rate, calculate taxes paid and net profit after taxes.
c. Assuming a dividend of $1.10 per share with 4.25 million shares outstanding, calculate EPS and additions to retained earnings.