Cost of Goods Sold Other operating expenses Depreciation Expense Interest Expens
ID: 2542005 • Letter: C
Question
Cost of Goods Sold
Other operating expenses
Depreciation Expense
Interest Expense
Current Assets
Total Fixed Assets
Accumulated Depreciation
This can be determined from the information given
Current Liabilities
Long-term Debt
Common Stock
A company has the financial data above for years 2013 and 2014. The average tax rate is 35% and the dividend payout ratio is 65%.
A) Construct the 2014 Income Statement.
B) Construct the 2013 and 2014 Balance Sheets.
Please show all steps. Thank you.
2013 2014 Sales $2100Cost of Goods Sold
$1200Other operating expenses
$200Depreciation Expense
$225Interest Expense
$175Current Assets
$1000 $1300Total Fixed Assets
$3500 $4000Accumulated Depreciation
$1250This can be determined from the information given
Current Liabilities
$900 $975Long-term Debt
$1500 $1350Common Stock
$400 This can be determined from the information givenExplanation / Answer
A) Income Statement for the year ended 2014 (Amounts in $)
Dividend to be paid in 2014 = Net Income*65% = $195*65% = $126.75
B) First of all we need to calculate the retained earnings balance at the end of 2013 by preparing balance Sheet for 2013.
Balance Sheet for the year ended 2013 (Amounts in $)
For Calulating the retained earnings balance of year 2017 we need to prepare the retianed earnings statement which is shown as follows:-
Retained Earnings Statement for 2014 (Amounts in $)
Balance Sheet for the year ended 2014 (Amounts in $)
Common Stock at the year ended 2014is taken as a balancing figure.
Sales 2,100 Less: Cost of goods sold (1,200) Gross Profit 900 Less: Expenses Other operating expenses (200) Depreciation Expense (225) Interest Expense (175) Income before taxes 300 Less: Income taxes ($300*35%) (105) Net Income 195