Question
In: Finance
1- You have been given the following information: Net sales = $20,000,000 Cost of goods sold...
1-
You have been given the following information:
Net sales = $20,000,000
Cost of goods sold = $9,000,000
Addition to retained earnings = $3,600,000
Dividends paid to preferred and common stockholders = $600,000
2-
the firm’s 2009 income statement lists the following: EBT = $6,000, Interest expense = $0, and Taxes = $3,000. The firm’s has no preferred stock outstanding and 30,000 shares of common stock outstanding. the 2009 earnings per share is
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Interest expense = $3,000,000
The firm's tax rate is 40 percent. Calculate the depreciation
expense.
Solutions
Expert Solution
| 1...Workings : | |
| Given | |
| Dividends paid to preferred and common stockholders | 600000 |
| Additions to retained earnings | 3600000 |
| So, net income for the year= | 4200000 |
| Income before tax = 4200000/60%*100%= | 7000000 |
| It is also given that | |
| Net sales | 20000000 |
| Less: Expenses | |
| Cost of goods sold | 9000000 |
| Interest expense | 3000000 |
| Total expenses | 12000000 |
| Difference(20 mln-12 mln.) | 8000000 |
| & Income before tax (from above) | 7000000 |
| So, depreciation expense= | 1000000 |
The income statement is as follows:
| 1..Income statement | |
| Net sales | 20000000 |
| Cost of goods sold | -9000000 |
| Gross profit | 11000000 |
| So, depreciation expense(Plug-in) | -1000000 |
| Interest expense | -3000000 |
| EBT | 7000000 |
| Less: Tax expense at 40% | 2800000 |
| Net Income for the year | 4200000 |
| Dividends paid to preferred and common stockholders | 600000 |
| Additions to retained earnings | 3600000 |
| 2…. | |
| EBT | 6000 |
| Taxes | -3000 |
| EAT | 3000 |
| No.of common shares o/s | 30000 |
| Earnings per share= | |
| EAT/No.of common shares | |
| 3000/30000= | 0.10 |
| (Answer) |
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