Problem 2-6
Objective: Income statement
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Given the following information prepare in good form an income statement for the Dental Drilling Company
Selling and administrative expense
$60,000
Depreciation expense
70,000
Sales
470,000
Interest expense
40,000
Cost of goods sold
140,000
Taxes
45,000
Solution
Problem 2-6
Instructions
Enter data and formulas to complete the Income Statement template below.
Dental Drilling Company
Income Statement
Sales
Cost of goods sold
Gross profit
FORMULA
Selling and administrative expense
Depreciation expense
Operating profit
FORMULA
Interest expense
Earnings before taxes
FORMULA
Taxes
Earnings after taxes
FORMULA
Problem 2-8
Objective:Determination of profitability
Prepare in good form an income statement for ATM Cards, Inc. Take your calculations all the way to
computing earnings per share.
Sales
$800,000
Shares outstanding
100,000
Cost of goods sold
300,000
Interest expense
20,000
Selling and administrative expense
40,000
Depreciation expense
30,000
Preferred stock dividends
80,000
Taxes
110,000
Solution
Problem 2-8
Instructions
Enter data and formulas to complete the Income Statement template below.
ATM Cards, Inc.
Income Statement
Sales
Cost of goods sold
Gross profit
FORMULA
Selling and administrative expense
Depreciation expense
Operating profit
FORMULA
Interest expense
Earnings before taxes
FORMULA
Taxes
Earnings after taxes
FORMULA
Preferred stock dividends
Earnings available to common stockholders
FORMULA
Shares outstanding
Earnings per share
FORMULA
Problem 2-21
The Jupiter Corporation has a gross profit $700,000 and $240,000 in depreciation expense.
The Saturn Corporation also has $700,000 in gross profit, with $40,000 in depreciation expense.
Selling and administrative expense is $160,000 for each company.
Given that the tax rate is 40 percent, compute the cash flow for both companies.Explain the
difference in cash flow between the two firms.
Solution
Problem 2-21
Instructions
Complete the template below by entering data and formulas to calculate the cash flow.
Jupiter
Saturn
Gross profit
Selling and adm. Expense
Depreciation
Operating profit
FORMULA
FORMULA
Taxes (40%)
FORMULA
FORMULA
Earnings after taxes
FORMULA
FORMULA
Plus depreciation expense
Cash flow
FORMULA
FORMULA
Explain the difference in cash flow between the two firms.