Use the information below to create (HINT: If possible) 3-years of an income sta

Question

Use the information below to create (HINT: If possible) 3-years of an income statement and a cash flow statement. HINT: Not all items listed below will appear on these two statements, though they may be necessary to create the statements.  

Sales: $1,000,000 in Y1, increasing at 15%/year

Depreciation Expense: $60,000/year (straight-line)

Retained Earnings: $200,000 Y0.

A/P: $70,000 Y1; $50,000 Y2, and $30,000 Y3

CapEx: $70,000/year

COGS: 40% of sales each year

Patents: $50,000

SG&A: 25%of sales Y1, 20% of sales Y2, and 15% of sales Y3

Common Stock: $400,000

Inventory: $50,000 Y1, $100,000 Y2, $300,000 Y3

R&D: $30,000/year

A/R: $10,000 Y1; $25,000 Y2; $50,000 Y3

Notes Payable: $150,000 Y1. No additional financing added in Y2 or Y3

PPE $400,000 Y1, $470,000 Y2, $540,000 Y3

Tax rate 35%

Explanation / Answer

Income statement For the years 1,2 and 3 year1 year2 year3 sales 1000000 1150000 1322500 1000000*1.15 1150000*1.15 less: Cost of goods sold (40% of sales) 400000 460000 529000 1000000*40% 1150000*40% 1322500*40% Gross profit 600000 690000 793500 Less: Operating Expenses Depreciation Expense 60000 60000 60000 Selling General & Admin Expenses 250000 230000 198375 1000000*25% 1150000*20% 1322500*15% R&D 30000 30000 30000 Total operating Expenses 340000 320000 288375 Net Operating income before tax 260000 370000 505125 less: income Tax 35% 91000 129500 176794 260000*0.35 370000*0.35 505125*0.35 Net Operating income after tax 169000 240500 328331 cash flow statement with the following Information cash flow statement can not be prepared. For year 0 amounts need for Working capital amount =s and Opening cash balance is Not given

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