1. Cute Camel 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) remain at 70% of net sales, and its depreciation and amortization expenses remain constant from year to year. 3. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Cute Camel expects to pay $100,000 and $1,281,375 of preferred and common stock dividends, respectively. mplete the Year 2 income statement data for Cute Camel, then answer the questions that follow. Be sure to round each dollar value to the n ple dollar. Cute Camel Woodcraft Company

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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1. Cute Camel 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) remain at 70% of net sales, and its depreciation and
amortization expenses remain constant from year to year.
3. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT).
4. In Year 2, Cute Camel expects to pay $100,000 and $1,281,375 of preferred and common stock dividends, respectively.
Complete the Year 2 income statement data for Cute Camel, then answer the questions that follow. Be sure to round each dollar value to the nearest
whole dollar.
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 (25%)
Earnings after taxes
Less: Preferred stock dividends
Earnings available to common shareholders
Less: Common stock dividends
Contribution to retained earnings
Cute Camel Woodcraft Company
Income Statement for Year Ending December 31
Year 1
$15,000,000
10,500,000
600,000
$3,900,000
390,000
3,510,000
877,500
$2,632,500
100,000
2,532,500
1,053,000
$1,479,500
Year 2 (Forecasted)
$
600,000
$
III
$1,822,062
Transcribed Image Text:1. Cute Camel 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) remain at 70% of net sales, and its depreciation and amortization expenses remain constant from year to year. 3. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT). 4. In Year 2, Cute Camel expects to pay $100,000 and $1,281,375 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Cute Camel, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. 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 (25%) Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Less: Common stock dividends Contribution to retained earnings Cute Camel Woodcraft Company Income Statement for Year Ending December 31 Year 1 $15,000,000 10,500,000 600,000 $3,900,000 390,000 3,510,000 877,500 $2,632,500 100,000 2,532,500 1,053,000 $1,479,500 Year 2 (Forecasted) $ 600,000 $ III $1,822,062
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