Please help for (a) (b) and (c) The Canton Corporation shows the following incom

Question

Please help for (a) (b) and (c)

The Canton Corporation shows the following income statement. The firm uses FIFO inventory accounting. CANTON CORPORATION Income Statement for 20X1 Sales Cost of goods sold Gross profit Selling and administrative expense Depreciation Operating profit Taxes (30%) Aftertax income 238,000 (14,000 units at $17.00) 154,000 (14,000 units at $11.00) S 84,000 14,280 12,400 S 57,320 17,196 s 40,124 a. Assume in 20X2 the same 14,000-unit volume is maintained, but that the sales price increases by 10 percent. Because of FIFO inventory policy, old inventory will still be charged off at $11.00 per unit. Also assume selling and administrative expense will be 6 percent of sales and depreciation will be unchanged. The tax rate is 30 percent. Compute aftertax income for 20X2. (Do not round intermediate calculations. Round your answer to the nearest whole number.) Aftertax income

Explanation / Answer

a

CANTON CORPORATION

Income Statement for 20X3

Sales

$ 261,800.00

Cost of Goods Sold

$ 154,000.00

Gross Profit

$ 107,800.00

Selling and Administrative Expense

$    15,708.00

Depreciation

$    12,400.00

Operating Profit

$    79,692.00

Taxes

$    23,907.60

After tax Profit

$    55,784.40

After tax Profit

$    55,784.40

b

After tax profit in 20X2

$    55,784.40

After tax profit in 20X1

$ 40124

Increase

$    15,660.40

Gain in after tax Income

39.03%

c

CANTON CORPORATION

Income Statement for 20X3

Sales

$ 222,530.00

Cost of Goods Sold

$ 161,000.00

Gross Profit

$    61,530.00

Selling and Administrative Expense

$    13,351.80

Depreciation

$    12,400.00

Operating Profit

$    35,778.20

Taxes

$    10,733.46

After tax Profit

$    25,044.74

After tax Profit

$    25,044.74

Working note.(Sale Price Calculation)

Sale price in 20X2

(17+10%)

$    18.70

Sale price in 20X3

(18.7-15%)

$    15.90

a

CANTON CORPORATION

Income Statement for 20X3

Sales

$ 261,800.00

Cost of Goods Sold

$ 154,000.00

Gross Profit

$ 107,800.00

Selling and Administrative Expense

$    15,708.00

Depreciation

$    12,400.00

Operating Profit

$    79,692.00

Taxes

$    23,907.60

After tax Profit

$    55,784.40

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