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Chapter 2: 6BP (page 48)

Given the following information, prepare an income statement for the Dental Drilling Company.

Selling and administrative expenses

$112,000

Depreciation expenses

73,000

Sales

489,000

Interest expenses

45,000

Cost of goods sold

156,000

Taxes

47,000

Short Answer

Expert verified

The net profit after tax of Dental Drilling Company is $56,000.

Step by step solution

01

Net income

Net income means the income arrived at after deducting all the expenses, whether direct or indirect, from the total revenue of the company.It is the income that is available for distribution to the shareholders.

02

Income statement for the Dental Drilling Company

Particulars

Amount ($)

Sales

489,000

Less: Cost of goods sold

156,000

Gross profit

333,000

Less: Selling and administrative expenses

112,000

Less: Depreciation expenses

73,000

Less: Interest expenses

45,000

Operating income

103,000

Less: Taxes

47,000

Net income after tax

56,000

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Most popular questions from this chapter

Dodge Ball Bearings had sales of 15,000 units at $45 per unit last year. The marketing manager projects a 30 percent increase in unit volume sales this year with a 20 percent price decrease (due to a price reduction by a competitor). Returned merchandise will represent 8 percent of total sales. What is your net dollar sales projection for this year?

The Holtzman Corporation has assets of \(400,000, current liabilities of \)50,000, and long-term liabilities of \(100,000. There is \)40,000 in preferred stock outstanding; 20,000 shares of common stock have been issued.

a. Compute book value (net worth) per share.

b. If there is $22,000 in earnings available to common stockholders and

Holtzman鈥檚 stock has a P/E of 18 times earnings per share, what is the current

price of the stock?

c. What is the ratio of market value per share to book value per share?

The Sterling Tire Company鈥檚 income statement for 20X1 is as follows:

STERLINE TIRE COMPANY

Income Statement

For the year ended December 31, 20X1

Sales (20,000 tires at \(60 each)

\)1,200,000

Less: variable costs (20,000 tires at \(30)

600,000

Less: fixed cost

400,000

Earnings before interest and taxes (EBIT)

\)200,000

Interest expenses

50,000

Earning before taxes (EBT)

\(150,000

Income tax expenses (30%)

45,000

Earning after taxe (EAT)

\)105,000

Given this income statement, compute the following:

b. Degree of financial leverage.

Assume the following data for Cable Corporation and Multi-Media Inc.

Capable corporation

Muli-media inc

Net income

\(31,200

\)140,000

Sales

317,000

2,700,000

Total assets

402,000

965,000

Total debts

163,000

542,000

Stockholder鈥檚 equity

239,000

423,000

c. Discuss the factors from part b that added or detracted from one firm

having a higher return on stockholders鈥� equity than the other firm as

computed in part a.

Classify the following balance sheet items as current or noncurrent:

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
See all solutions

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