4BP A-Rod Fishing Supplies had sales... [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: 4BP (page 48)

A-Rod Fishing Supplies had sales of $2,500,000 and cost of goods sold of $1,710,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of $4,680,000. What was the firm鈥檚 operating profit?

Short Answer

Expert verified

The operating profit of A-Rod fishing supplies: $259,200

Step by step solution

Given are the following amounts

Particulars	Amount ($)
Sales	2,500,000
Cost of goods sold	1,710,000
Selling and administrative expense (10% of sales)	250,000
Depreciation (6% of $4,680,000)	280,800

Calculation of the firm’s operating profit

$O p e r a t i n g p r o f i t = S a l e s - C o s t o f g o o d s s o l d - S e l l i n g a n d a d m i n i s t r a t i v e e x p e n s e - D e p r e c i a t i o n = $ 2, 500, 000 - $ 1, 720, 000 - $ 250, 000 - $ 280, 800 = $ 259, 200$

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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

Sales	\( 2790000
Cost of goods sold	1790000
Gross profits	\) 1000000
Selling and administrative expenses	302000
Operating profits	\( 698000
Interest Expense	54800
Income before tax	\) 643200
Taxes 30%	192960
Income after tax	$ 450240

Retained earning	Bond payable
Accounts payable	Accrued wages payable
Prepaid expenses	Accounts receivable
Plant and equipment	Capital in excess of par
Inventory	Preferred stock
Common stock	Marketable security

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A-Rod Fishing Supplies had sales of \(2,500,000 and cost of goods sold of \)1,710,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of $4,680,000. What was the firm鈥檚 operating profit?

Short Answer

Step by step solution

Given are the following amounts

Calculation of the firm’s operating profit

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