3- Euro Designs, Inc. Sales to increase in 2016 from the 2015 level of $ 3.5 million to $ 3.9 million. Due to large loan repayment, interest expense is expected to decrease in 2016 to $ 325,000. The company plans to increase its cash dividend payments from 2016 to $ 320,000. Below is the income statement for the end of 2015. Euro Designs, Inc., Income Statement for the Year Ended December 31, 2015 Sales revenue $3,500,000 Less: Cost of goods sold 1,925,000 Gross profits $1,575,000 Less: Operating expenses 420,000 Operating profits $1,155,000 Less: Interest expense 400,000 Net profits before taxes $ 755,000 Less: Taxes (rate = 40%) 302,000 Net profits after taxes $ 453,000 Less: Cash dividends 250,000 To retained earnings $ 203,000 Use the percentage of sales method to prepare the 2016 Initial Income Statement for Euro Designs, Inc. Explain why the statement might reduce the company's actual initial income for 2016.
.3- Euro Designs, Inc. Sales to increase in 2016 from the 2015 level of $ 3.5 million to $ 3.9 million. Due to large loan repayment, interest expense is expected to decrease in 2016 to $ 325,000. The company plans to increase its cash dividend payments from 2016 to $ 320,000. Below is the income statement for the end of 2015.
|
Euro Designs, Inc., Income Statement for the Year Ended December 31, 2015 |
|
|
Sales revenue |
$3,500,000 |
|
Less: Cost of goods sold |
1,925,000 |
|
Gross profits |
$1,575,000 |
|
Less: Operating expenses |
420,000 |
|
Operating profits |
$1,155,000 |
|
Less: Interest expense |
400,000 |
|
Net profits before taxes |
$ 755,000 |
|
Less: Taxes (rate = 40%) |
302,000 |
|
Net profits after taxes |
$ 453,000 |
|
Less: Cash dividends |
250,000 |
|
To |
$ 203,000 |
- Use the percentage of sales method to prepare the 2016 Initial Income Statement for Euro Designs, Inc.
- Explain why the statement might reduce the company's actual initial income for 2016.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
