Please do not give solution in image format ? And Fast Answering Please ? And Explain Proper Step by Step. 3. Income statementThe income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during aspecified period of time. It reports a firm's gross income, expenses, net income, and the income that is available for distribution to its preferred andcommon shareholders.The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm's revenues and expenses to theperiod in which they were incurred, not necessarily when cash was received or paid. Investors and analysts use the information given in the incomestatement and other financial statements and reports to evaluate the company's financial performance and condition.Consider the following scenario:Cute Camel Woodcraft Company's income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25%next year.1. Cute Camel is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings beforeinterest and taxes (EBIT).2. The company's operating costs (excluding depreciation and amortization) remain at 70% of net sales, and its depreciation andamortization 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 $200,000 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 nearestwhole dollar. Net salesLess: Operating costs, except depreciation and amortizationLess: Depreciation and amortization expensesOperating Income (or EBIT)Less: Interest expensePre-tax income (or EBT)Less: Taxes (25%)Earnings after taxesLess: Preferred stock dividendsEarnings available to common shareholdersLess: Common stock dividendsContribution to retained earningsIncome Statement for Year Ending December 31Year 1$20,000,00014,000,000800,000$5,200,000520,0004,680,0001,170,000$3,510,000200,0003,310,0001,053,000$2,257,000Given the results of the previous income statement calculations, complete the following statements:Year 2 (Forecasted)$25,000,00017,500,000800,000$200,0001,281,375$2,789,875.• In Year 2, if Cute Camel has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receivein annual dividends.• If Cute Camel has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change fromin Year 1 toin Year 2.• Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed fromIn Year 2.In Year 1 toIt isto say that Cute Camel's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annualcontribution to retained earnings, $2,257,000 and $2,789,875, respectively. This is becauseof the items reported in the incomestatement involve payments and receipts of cash.

It is the income attributable to all the all the shareholder on a per share basis

Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating incomer(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 Year 1 $20,000,000 14,000,000 800,000 $5,200,000 520,000 4,680,000 1,170,000 $3,510,000 200,000 3,310,000 1,053,000 $2,257,000 Year 2 (Forecasted) $25,000,000 17,500,000 800,000 $ • Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 2. $ 200,000 1,281,375 $2,789,875 Given the results of the previous income statement calculations, complete the following statements: In Year 2, if Cute Camel has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. If Cute Camel 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. in Year 1 to . It is to say that Cute Camel'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, $2,257,000 and $2,789,875, respectively. This is because of the items reported in the income statement Involve payments and receipts of cash.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q