Business Administration - Accounting & Financial Planning FIN401 Chapter Notes - Chapter 3: Retained Earnings, Income Statement, Financial Statement

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greenmuskrat329

20 Jan 2018

School

Seneca College

Department

Business Administration - Accounting & Financial Planning

Course

Business Administration - Accounting & Financial Planning FIN401

Professor

Larry Hurst

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Document Summary

Abc company earnings statement for the year ending dec. 31, Net sales total of all sales, less spoilage, returns and discounts. Cost of goods sold (cogs) direct cost associated with manufacturing the product to be sold. Operating costs salaries, commissions, office expenses and general overhead not associated directly with manufacturing. Depreciation/depletion/amortization non-cash provisions for the reducing value of the (cid:272)o(cid:373)pa(cid:374)(cid:455)"s assets. Writedowns and writeoffs non-cash accounting for the sudden drop in value of an asset. Non-operating income i(cid:374)flows that a(cid:396)e (cid:374)ot a (cid:396)esult of the (cid:272)o(cid:373)pa(cid:374)(cid:455)"s di(cid:396)e(cid:272)t business (interest -loans, investment income) Shows extent to which profits are distributed to shareholders or retained in the company. Retained earnings statement for the year ending dec. 31, 20xx. (cid:862)p(cid:396)ofits(cid:863) su(cid:271)t(cid:396)a(cid:272)t dep(cid:396)e(cid:272)iatio(cid:374) a(cid:374)d a(cid:373)o(cid:396)tizatio(cid:374) (cid:272)ha(cid:396)ges a(cid:374)d impairment losses ( non-cash expenses). (cid:862)p(cid:396)ofits(cid:863) ig(cid:374)o(cid:396)e (cid:272)ash e(cid:454)pe(cid:374)ditu(cid:396)es o(cid:374) (cid:374)ew (cid:272)apital e(cid:395)uip(cid:373)e(cid:374)t a(cid:374)d intangibles (the expenses are capitalized) (cid:862)p(cid:396)ofits(cid:863) (cid:396)e(cid:272)o(cid:396)d i(cid:374)(cid:272)ome and expenses at the time of sales, not when the cash exchanges actually occur.

Related Questions

CREEK ENTERPRISES, INC.

Income Statement Year Ending December 21, 2015

SALES REVENUE $ 30,000,000

LESS: COGS 21,000,000

GROSS PROFIT $ 9,000,000

LESS: OPERATING EXPENSES

SELLING EXPENSE $ 3,000,000

GENERAL & ADMIN. EXPENSE 1,800

LEASE EXPENSE 200,000

DEPRECIATION EXPENSE 1,000,000

TOTAL OPERATING EXPENSE $ 6,000,000

OPERATING PROFITS $ 3,000,000

LESS:INTEREST EXPENSE: 1,000,000

NET PROFIT BEFORE TAXES $ 2,000,000

LESS:TAXES(RATE = 40%) 800,000

NET PROFIT AFTER TAXES $ 1,200,000

LESS: PREFERRED STOCKHLDR

DIVIDEND 100,000,00

EARNINGS AVAILABLE FOR

COMMON STOCKHOLDERS $1,100,000

Common-size statement analysis A common-size income statement for Creek Enterprisesâ
2014 operations follows. Using the firmâs 2015 income statement, develop the 2015 common-size income statement and compare it with the 2014 statement. Which areas require further analysis and investigation?

CREEK, INC. COMMON-SIZE INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014

SALES REVENUE ($35,000,000) 100%

LESS: COGS 65.9

GROSS PROFITS 34.1%

LESS: OPERATING EXPENSES

SELLING EXPENSE 12.7%

GENERAL & ADMIN EXPENSE 6.3

LEASE EXPENSE 0.6

DEPRECIATION EXPENSE 3.6

TOTAL OPERATING EXPENSE 23.2

OPERATION PROFITS 109%

INTEREST EXPENSE 1.5

NET PROFIT BEFORE TAXES 9.4%

LESS:TAXES(RATE = 40%) 3.8

NET PROFIT AFTER TAXES 5.6%

LESS; PREFERRED STOCKHLDR DIVIDENDS 0.1

EARNINGS AVAIL. FOR COMMON STOCKHLDRS 5.5%

copperwombat680

Bells manufacturing estimates that the sales for the 2016 financial year will be $2.25 million. No new borrowing was obtained and, therefore, the interest expense remained unchanged at $24,500. Bells Manufacturing is planning on paying cash dividends of $85,000 during 2016. Refer to the financial data in the table while answering the following

a. Compile the pro forma income statement for the year ended December 31, 2016, using the percentage of sales method.

b. Compile the pro forma income statement for the year ended December 31, 2016, using the fixed and variable cost data

c. As the financial manager, which of the two pro forma statements would you regard as more accurate, explain.

Bell Manufacturing

Income Statement for the Year

Ended December 31, 2015

Sales Revenue $1,800,000

Less Cost of Goods sold $1,100,000

Gross Profits $700,000

Less: Operating Expenses $450,000

Operating Profits $250,000

Less: Interest Expense $24,500

Net Profits before taxes $225,500

Less: Taxes (rate = 40%) $90,200

Net Profit after taxes $135,300

Less: Cash Dividends $85,000

To retained earnings $50,300

--------------------------------------------------------------------------------------------

Bell Manufacturing Breakdown

Of Cost and Expenses into Fixed

And Variable Components for the

Year Ended December 31, 2015

Cost of goods sold

Fixed cost $750,000

Variable cost $350,000

Total Costs $1,100,000

Operating Expenses

Fixed expenses $155,000

Variable expenses $295,000

Total Expense $450,000

the chief accountant for grandveiw corporation provides you withthe companys 2016 stateent of cash flows and income statement theacountant has asked for your help with some missing figures in thecomopanys comprehensive balance sheets these financial statementsare shown next ($ in millions)

Grandveiw corp

statement of cash flows

for the year ended decemeber 31 2016

cash flows from operating activities

Collection from customer 71

payment to supplier (30)

Payment of general an administrative expenses (18)

payment of income taxes (9)

net cash from operatingactivites 14

cash flows from investing activites:

sale ofinvestments 65

Cash flows from financing activites:

issuance of common stock 10

Payment of divedends (3)

net cash flows from financingactivites 7

net increase incash 86

âGrandveiw corporation

income statement

for the year ended dec 31 2016

salesrevenue 80

cogs 32

grossprofit 48

operatingexpenses

General and admin. depreciation 18

Deprec. 10

total operatingexpenses 28

operatingincome 20

other income

gain on sale ofinvest. 15

income b4 taxes 35

income taxexpense 7

netincome 2

grandveiw corp

balance sheets

At dec 31 2016

assets 2016 2015

cash 145 ?

a/r ? 84

investments - 50

inventory 60 ?

property plant equipment 150 150

less accumulated dep. (65) ?

total assets? ?

liab. and shareholders equity

accounts payable to suplliers 40 30

payable for selling and admin. expenses 9 9

income tax payable 22 ?

common stock 240 230

retained earnings ? 47

total liabilites and shareholdersequity ? ?

Required:

1. calculate missing amounts

2. Prepare the operating activites section of Grandveiw 2016statement of cash fllows using the indirect method.

Show all your work!

taupewombat834

Business Administration - Accounting & Financial Planning FIN401 Chapter Notes - Chapter 3: Retained Earnings, Income Statement, Financial Statement

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