Question

Complete the 2019 income statement of the ABC Inc. using the information provided.

Income Statement (in thousands)
	Year 2019
Revenues	2,450
COGS	1,950
Depreciation	75
EBIT
Interest	45
Taxable Income
Taxes (25%)
Net Income
Dividends (Payout Ratio= 35%)
Additions to Retained Earnings

Answer 1

1. To calculate EBIT we will subtract cost of goods sold and operating expenses from total revenue, here operating expenses is the depreciation ie.$75

Revenues	2,450
COGS	(1,950)
Operating Expense (Depreciation)	(75)
EBIT	425

2. Now to calculate Taxable Income we will subtract the Interest

EBIT	425
Interest	(45)
Earning Before Tax ie.Taxable Income	380

3. Subtracting Tax from Taxable Income we have Net Income

Taxable Income	380
Tax (25% of Taxable Income)	(95)
Net Income	285

4. Dividend Payout and Additions to Retained Earnings

Net Income	285
Dividend Payout (35% of Net Income)	(99.75)
Additions to Retained Earnings	185.25

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