Given the income statement for 2013: Net Sales $52,459,588 Cost of Goods Sold $2

Question

Given the income statement for 2013:

Net Sales $52,459,588

Cost of Goods Sold $26,229,794

Gross Income $26,229,794

Operating Expenses $10,491,918

Operating Income $15,737,876

Other Income $2,622,979

Interest Expense $4,000,000

Net Profit Before Taxes $14,360,856

Taxes $5,026,300

Net Income $9,334,556

Earnings Per Share $0.0187

complete the income statement for 2014 using goal seek in Excel if EPS for the next year are $0.0312, assuming the number of shares does not change, COGS is the same percentage of Net Sales as the previous year, Operating Expenses is the same percentage of Net Sales as the previous year, Other Income is the same percentage of Net Sales as the previous year, the Interest Expense does not change, and the tax rate (35%) does not change.

Explanation / Answer

Solution :-

let the net sales for 2014 be X
Net profit before tax=Sales-COGS-operating expenses+other income-interest expenses
23,960,357=X-(X*50%)-(X*20%)+(X*5%)-4,000,000
27,960,357=X-X/2-X/5+X/20
on solving X we get net sales=$79,886,734

Particular 2013($) 2014($) Sales 52,459,588 79,886,734 Less COGS 26,229,794 39,943,367 Gross profit 26,229,794 39,943,367 Less Operating Expenses 10,491,918 15,977,347 Operating Income 15,737,876 23,966,020 Add Other Income 2,622,979 3,994,337 less Interest expenses 4,000,000 4,000,000 Net Profit Before Taxes 14,360,856 23,960,357 Taxes @35% 5,026,300 8,386,125 Net Income 9,334,556 15,574,232 Earnings Per Share 0.0187 0.0312 No of shares(Net income/EPS) 499174118 499174118 COGS as %of Net profit 50% 50% Operating Expenses is the same percentage of Net Sales 20% 20% Other Income is the same percentage of Net Sales 5% 5%

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