2-5BP Arrange the following income sta... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 2-5BP (page 48)

Arrange the following income statement items so they are in the proper order of an income statement:
Taxes
Earning per share
Share Outstanding
Earning before taxes
Interest Expense
Cost of goods sold
Depreciation Expense
Earning after taxes
Preferred Stcok dividends
Earning available to common stockholders
Sales
Selling and administrative expense
Gross profit

Short Answer

Expert verified

The costs of goods sold are deducted from sales to derive the gross profits. The gross profits are further reduced by selling and administrative cost, interest expense, depreciation expense to derive the earnings before tax. The taxes are subtracted from the earnings before tax to derive the earnings after tax. The preferred stock dividends are further reduced to derive earnings available to common stockholders. The earnings of common stockholders are divided by shares outstanding to calculate the earnings per share.

Step by step solution

Income statement

An income statement is a major component of the financial statement prepared by an organization to show its financial performance.

Arrangement of income item in proper order

S.no.	Particulars
1.	Sales
2.	Cost of goods sold
3.	Gross profit
4.	Selling and administrative cost
5.	Interest Expense
6.	Depreciation Expense
7.	Earning Before taxes
8.	Taxes
9.	Earning after taxes
10.	Preferred stock dividends
11.	Earning available to common stockholders
12.	Shares outstanding
13.	Earnings per shares

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Stud Clothier
Balance sheet 20X1
Assets		Liabilities and Equity
Cash	\)60,000	Account payable	\(220,000
Account receivable	240,000	Accrued taxes	30,000
Inventory	350,000	Bonds payable (long term)	150,000
Plant and equipment	410,000	Common stock	80,000
		Paid in capital	200,000
		Retained earnings	380,000
Total assets	\)1,060,000	Total LIbilities and Equity	$1,060,000

Sales	$900,000
Shares outstanding	50,000
Cost of goods sold	400,000
Interest expenses	40,000
Selling and administration expenses	60,000
Depreciation expenses	20,000
Preferred stock dividend	80,000
Taxes	50,000

SNIDER CORPORATION
Balance sheet
December 31, 20X1
Assets
Current assets:
Cash	\(52,200
Marketable securities	24,400
Accounts receivable (net)	222,000
Inventory	238,000
Total current assets	\)536,600
Investments	65,900
Plant and equipment	\(615,000
Less: accumulated depreciation	(271,000)
Net plant and equipment	\)344,000
Total assets	\(946,500
Liabilities and stockholder鈥檚 equity
Current liabilities:
Account payables	\)93,400
Notes payable	70,600
Accrued taxes	17,000
Total current liabilities	\(181,000
Long term liabilities:
Bonds payable	\)153,200
Total liabilities	\(334,200
Stockholder鈥檚 equity
Preferred stock, \)50 per value	\(100,000
Common stock, \)1 par value	80,000
Capital paid in excess of par	190,000
Retained earnings	242,300
Total stockholder鈥檚 equity	\(612,300
Total liabilities and stockholder鈥檚 equity	\)946,500

SNIDER CORPORATION
Income statement
For the year ending December 31, 20X1
Sales (on credit)	\(2,064,000
Less: cost of goods sold	1,313,000
Gross profit	\)751,000
Less: selling and administrative expenses	496,000*
Operating profit (EBIT)	\(255,000
Less: interest expenses	26,900
Earning before tax (EBT)	\)228,100
Less: taxes	83,300
Earning after taxes (EAT)	\(144,800

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Short Answer

Step by step solution

Income statement

Arrangement of income item in proper order

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Taxes	Earning per share
Share Outstanding	Earning before taxes
Interest Expense	Cost of goods sold
Depreciation Expense	Earning after taxes
Preferred Stcok dividends	Earning available to common stockholders
Sales	Selling and administrative expense
Gross profit