(Solved): 3. Income statement The income statement, also known as the profit and loss (PB1) statement, provid ...

3. Income statement The income statement, also known as the profit and loss (PB1) statement, provides a snapshot of the financial performance of a company during a specified penod of time. It reports a firm's gross income, expenses, net income, and the income that is avalable for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GADP) that match the firm's revenues and expenses to the Denod in which they were incurred, not necessaniy when cash was received or paid. Irwestors and analysts use the information given in the income statement and other financal statements and reports to evaluate the company's financil performance and condition. Consider the following scenario: Cuke Came Wooddatt Company's income itatement reports data for its fist year of operation. The firm's CEO would like sales to increase by 25\% next vear: 1. Cute Camet is able to achieve thus fevel of increased sales, but is interest costs increase from \( 10 \% \) to \( 15 \% \) of earnings before interest and taxes (EBIT). 2. The company's operating costs (excluding dearecation and amortuabon) remain at \( 70 \% \) of net sales, and its deoreciation and amortization expenses remain canstant from year to year. 3. The compary's taxiate remans constant at \( 40 \% \) of its pre-tax wcome or eaningi before taxes (E?7) 4. In vear 2. Cute Camel expects to par \( \$ 100,000 \) and \( \$ 1,025,100 \) of preferthd and comnon stock dividends, respectively: Conplete the Year 2 income statement data for Cute Camel, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dolac, Given the results of the previous ancome statement calculabons. coinplete the followirid ntatements: Civen the results of the prevous income statement alailations, complete the following statements: - In Year 2, f Cute Camed has 5,000 shares of orefered stodk issued and outstanding, then ead breferred share should epect to receve in arnual divdends. - If Cute Camel has 400,000 shares of comman stodk issued and outstanding, then the firm's eamings per share (EPS) is expected to diange from in Year 1 to in vear 2 . - Cute Camers eamings belore interent, taves, depreaation and ansortuation (Eerroa) value changed from in wear it to in vear 2 . - it is to say that Cute Camer's net inflows and outlows of cash at the end of Yoars 1 and 2 are equal fo the company's annuat contribukion to retaned earnings, \( \$ 1,163,600 \) and \( 51,437,650 \), respectriely, this is becaune of the Reems reported in the income ststement imolve payments and receipts of cash.