# Income statements

1.Problem 2-1 Income statement [LO1]

 Frantic Fast Foods had earnings after taxes of \$1,200,000 in the year 2009 with 322,000 shares outstanding. On January 1, 2010, the firm issued 30,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 24 percent.

 (a) Compute earnings per share for the year 2009. (Round your answer to 2 decimal places. Omit the “\$” sign in your response.)

 Earnings per share

 (b) Compute earnings per share for the year 2010. (Round your answer to 2 decimal places. Omit the “\$” sign in your response.)

 Earnings per share

2.Problem 2-3 Gross profit [LO1]

 Hillary Swank Clothiers had sales of \$428,000 and cost of goods sold of \$260,000.

 (a) What is the gross profit margin (ratio of gross profit to sales)? (Round your answer to the nearest whole percentage. Omit the “%” sign in your response.)

 Gross profit margin

 (b) If the average firm in the clothing industry had a gross profit of 35 percent, how is the firm doing?

 The firm is .

3.Problem 2-4 Operating profit [LO1]

 A-Rod Fishing Supplies had sales of \$2,160,000 and cost of goods sold of \$1,550,000. Selling and administrative expenses represented 10 percent of sales. Depreciation was 6 percent of the total assets of \$4,450,000.

 What was the firm’s operating profit? (Omit the “\$” sign in your response.)

 Operating profit

4.Problem 2-6 Income statement [LO1]

 Given the following information, prepare an income statement for the Dental Drilling Company. (Input all amounts as positive values. Omit the “\$” sign in your response.)

 Selling and administrative expense \$ 72,000 Depreciation expense 71,000 Sales 536,000 Interest expense 45,000 Cost of goods sold 179,000 Taxes 53,000

5.Problem 2-7 Income statement [LO1]

 Given the following information, prepare an income statement for Jonas Brothers Cough Drops. (Input all amounts as positive values. Omit the “\$” sign in your response.)

 Selling and administrative expense \$ 326,000 Depreciation expense 196,000 Sales 1,600,000 Interest expense 124,000 Cost of goods sold 551,000 Taxes 167,000

6.Problem 2-11 Depreciation and earnings [LO1]

 Stein Books, Inc., sold 2,300 finance textbooks for \$200 each to High Tuition University in 2010. These books cost \$170 to produce. Stein Books spent \$12,300 (selling expense) to convince the university to buy its books. Depreciation expense for the year was \$15,500. In addition, Stein Books borrowed \$102,000 on January 1, 2010, on which the company paid 17 percent interest. Both the interest and principal of the loan were paid on December 31, 2010. The publishing firm’s tax rate is 30 percent. Prepare an income statement for Stein Books. (Input all amounts as positive values. Omit the “\$” sign in your response.)

7.Problem 2-15 Development of balance sheet [LO3]

 Arrange the following items in proper balance sheet presentation (Be sure to list the assets in order of their liquidity. Input all amounts as positive values. Omit the “\$” sign in your response):

 Accumulated depreciation \$ 347,000 Retained earnings 46,000 Cash 14,000 Bonds payable 137,000 Accounts receivable 51,000 Plant and equipment—original cost 668,000 Accounts payable 38,000 Allowance for bad debts 6,000 Common stock, \$1 par, 100,000 shares outstanding 100,000 Inventory 71,000 Preferred stock, \$52 par, 1,000 shares outstanding 52,000 Marketable securities 28,000 Investments 24,000 Notes payable 39,000 Capital paid in excess of par (common stock) 91,000

8.Problem 2-16 Earnings per share and retained earnings [LO1, 3]

 Okra Snack Delights, Inc., has an operating profit of \$241,000. Interest expense for the year was \$35,800; preferred dividends paid were \$34,100; and common dividends paid were \$39,600. The tax was \$61,400. The firm has 23,700 shares of common stock outstanding.

 (a) Calculate the earnings per share and the common dividends per share. (Round your answers to 2 decimal places. Omit the “\$” sign in your response.)

 Earnings per share Common dividends per share

 (b) What was the increase in retained earnings for the year? (Omit the “\$” sign in your response.)

 Increase in retained earnings

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