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Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Depreciation expense. Given: Sales = $54,000 Cost = $29,500 Interest expense = $2,050 Tax rate = 21% Addition to retained earnings = $5,300 Dividends paid = $1,720 Now, net income can be computed as: Particulars $ Addition to retained earnings 5,300 Add: Cash dividends 1,720 Net income 7,020 Also, EBT can be computed as: Earnings before taxes = Net income 1 – Tax rate Earnings before taxes = $7,020 1 – 0 .21 Earnings before taxes = $7,020 0 .79 Earnings before taxes = $8,887 Now, depreciation expense can be computed as: Particulars $ Earnings before taxes (EBT) 8,886 Add: Interest expense 2,050 Earnings before interest and taxes (EBIT) {a} 10,936 Sales 54,000 Less: Costs 29,500 Gross Profit {b} 24,500 Depreciation expense [{b}-{a}] 13,564

Income Statement: Income statement is one of the three financial statements that every organization prepares periodically. It helps the users of the financial statements in analyzing the profitability of the organization. To compute : Depreciation expense. Given: Sales = $54,000 Cost = $29,500 Interest expense = $2,050 Tax rate = 21% Addition to retained earnings = $5,300 Dividends paid = $1,720 Now, net income can be computed as: Particulars $ Addition to retained earnings 5,300 Add: Cash dividends 1,720 Net income 7,020 Also, EBT can be computed as: Earnings before taxes = Net income 1 – Tax rate Earnings before taxes = $7,020 1 – 0 .21 Earnings before taxes = $7,020 0 .79 Earnings before taxes = $8,887 Now, depreciation expense can be computed as: Particulars $ Earnings before taxes (EBT) 8,886 Add: Interest expense 2,050 Earnings before interest and taxes (EBIT) {a} 10,936 Sales 54,000 Less: Costs 29,500 Gross Profit {b} 24,500 Depreciation expense [{b}-{a}] 13,564

Solution Summary: The author explains that income statement is one of the three financial statements that every organization prepares periodically.

CORPORATE FINANCE--CONNECT ACCESS CARD

CORPORATE FINANCE--CONNECT ACCESS CARD

12th Edition

ISBN: 9781264807475

Author: Ross

Publisher: MCG CUSTOM

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Chapter 2, Problem 14QAP

Chapter 2, Problem 16QAP

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CORPORATE FINANCE--CONNECT ACCESS CARD

Ch. 2 - Prob. 1CQ Ch. 2 - Prob. 2CQ Ch. 2 - Prob. 3CQ Ch. 2 - Prob. 4CQ Ch. 2 - Prob. 5CQ Ch. 2 - Cash Flow from Assets Why is it not necessarily...Ch. 2 - Operating Cash flow Why is it not necessarily bad...Ch. 2 - Net Working Capital and Capital Spending Could a...Ch. 2 - Cash Flow to Stockholders and Creditors Could a...Ch. 2 - Prob. 10CQ

Ch. 2 - Building a Balance Sheet Alesha, Inc., has current...Ch. 2 - Building an Income Statement Gia, Inc, has sales...Ch. 2 - Market Values and Book Values Klingon Cruisers,...Ch. 2 - Calculating Taxes Terri Simmons is single and had...Ch. 2 - Calculating OCF Sheaves, Inc., has sales of...Ch. 2 - Prob. 6QAP Ch. 2 - Prob. 7QAP Ch. 2 - Prob. 8QAP Ch. 2 - Prob. 9QAP Ch. 2 - Prob. 10QAP Ch. 2 - Cash Flows Ritter Corporations accountants...Ch. 2 - Financial Cash Flows The Stancil Corporation...Ch. 2 - Building an Income Statement During the year, the...Ch. 2 - Prob. 14QAP Ch. 2 - Prob. 15QAP Ch. 2 - Residual Claims Stark: Inc., is obligated to pay...Ch. 2 - Net Income and OCF During 2019, Rainbow Umbrella...Ch. 2 - Prob. 18QAP Ch. 2 - Prob. 19QAP Ch. 2 - Prob. 20QAP Ch. 2 - Prob. 21QAP Ch. 2 - Prob. 22QAP Ch. 2 - Cash Flows You are researching Time Manufacturing...Ch. 2 - Prob. 24QAP Ch. 2 - Prob. 1MC Ch. 2 - Prob. 2MC Ch. 2 - Prob. 3MC

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