Based on the information in the table below, prepare an income statement for Win

Question

Based on the information in the table below, prepare an income statement for Windswept Woodworks, Inc. for year 2-Assume that the company pays a flat tax rate of 34% on its taxable income. (Round each entry to 2 decimal places.) Windswept Woodworks, Inc. Input Data millions of dollars) Accumulated depreciation Cost of goods sold Depreciation expense Common stock dividends paid Addition to retained earnings Gross plant & equipment 10,260 Market price per share - year end Number of shares outstanding 500 million sold Earnings before interest and taxes

Explanation / Answer

Income statement for year 2 is as follows.

Sales, Cost of Goods Sold, Interest Expenses numbers are taken directly from the Input Data.

Depeciation expenses = Accummulated depreciation of year 2 - Accummulated depreciation of year 1 = 6734 - 6622 = 112

Gross profit on sales = Sales - Cost of Goods Sold

Earnings before Interest and taxes = Gross profit on Sales - Depreciation expense

Taxable income = Earnings before Interest and taxes - Interest expense

Taxes = Taxable income * 34%

Net income = Taxable income - Taxes

Sales 3,018.00 Cost of Goods Sold 1,500.00 Gross profit on sales 1,518.00 Depreciation expenses 112.00 Earnings before Interest and taxes 1,406.00 Interest expense 140.00 Taxable income 1,266.00 Taxes (@34%) 430.44 Net income 835.56

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