8BP Prepare an income statement for ... [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: 8BP (page 49)

Prepare an income statement for Franklin Kite Co. Take your calculations all the way to computing earnings per share.
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

Short Answer

Expert verified

The earning per share is $5.

Step by step solution

Earning per share

Earning per share is computed to know the company鈥檚 earnings for each share of its stockand is widely used by the users of the organization for estimating the corporate values.

Income statement for Franklin Kite Co.

Particulars	Amount ($)
Sales	900,000
Less: Cost of goods sold	400,000
Gross profit	500,000
Less: Selling and administrative expenses	60,000
Less: Depreciation expenses	20,000
Less: Interest Expenses	40,000
Operating income	380,000
Less:Taxes	50,000
Net income after tax	330,000
Less: Preferred stock dividend	80,000
Income available for shareholders	250,000
No. of shares outstanding	50,000
Earnings per Share	5

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	20X1	20X2
Sales	\(3,230,000	\)3,370,000
Cost of goods sold	2,130,000	2,850,000
Gross profits	\(1,100,000	\)520,000
Selling and administrative expenses	298,000	227,000
Operating profits	\(802,000	\)293,000
Interest expense	47,200	51,600
Income before taxes	\(754,800	\)241,400
Taxes (35%)	264,180	84,490
Income after tax	\(490,620	\)156,910

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Short Answer

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Earning per share

Income statement for Franklin Kite Co.

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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