.3- Euro Designs, Inc. Sales to increase in 2016 from the 2015 level of $ 3.5 million to $ 3.9 million. Due to large loan repayment, interest expense is expected to decrease in 2016 to $ 325,000. The company plans to increase its cash dividend payments from 2016 to $ 320,000. Below is the income statement for the end of 2015. Euro Designs, Inc., Income Statement for theYear Ended December 31, 2015Sales revenue$3,500,000Less: Cost of goods sold 1,925,000 Gross profits$1,575,000Less: Operating expenses 420,000 Operating profits$1,155,000Less: Interest expense 400,000 Net profits before taxes$ 755,000Less: Taxes (rate = 40%) 302,000 Net profits after taxes$ 453,000Less: Cash dividends 250,000 To retained earnings$ 203,000 Use the percentage of sales method to prepare the 2016 Initial Income Statement for Euro Designs, Inc.Explain why the statement might reduce the company's actual initial income for 2016.

An Income Statement is a statement that shows the company’s income and expenditure.

Answered: 3- Euro Designs, Inc. Sales to increase…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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.3- Euro Designs, Inc. Sales to increase in 2016 from the 2015 level of $ 3.5 million to $ 3.9 million. Due to large loan repayment, interest expense is expected to decrease in 2016 to $ 325,000. The company plans to increase its cash dividend payments from 2016 to $ 320,000. Below is the income statement for the end of 2015.

Euro Designs, Inc., Income Statement for the Year Ended December 31, 2015
Sales revenue	$3,500,000
Less: Cost of goods sold	1,925,000
Gross profits	$1,575,000
Less: Operating expenses	420,000
Operating profits	$1,155,000
Less: Interest expense	400,000
Net profits before taxes	$ 755,000
Less: Taxes (rate = 40%)	302,000
Net profits after taxes	$ 453,000
Less: Cash dividends	250,000
To retained earnings	$ 203,000

Use the percentage of sales method to prepare the 2016 Initial Income Statement for Euro Designs, Inc.
Explain why the statement might reduce the company's actual initial income for 2016.

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