Question

# Complete the following Income Statement for 12/31/2019 with these assumptions which are in no particular order:...

Complete the following Income Statement for 12/31/2019 with these assumptions which are in no particular order:

1. The company has an Operating Profit Margin of 30%
2. The company has an Account Receivable turnover of 12
3. The Contribution Rate for this company is 40%
4. They have an Interest Coverage ratio of 5
5. All sales for the company were on credit
6. They have a 30% tax rate
7. The account receivable balance as of 12/31/2019 was \$7,000,000

#### Homework Answers

Answer #1

Solution:-

Income statement for 12/31/2019

 Particulars Amount Sales \$84,000,000 -Variable costs (\$50,400,000) Contribution \$ 33,600,000 -Fixed costs (\$8,400,000) EBIT \$25,200,000 -Interest (\$5,040,000) EBT \$20,160,000 -Tax (EBT * tax rate) (\$6,048,000) Net Income \$14,112,000

Working notes:

1.Sales = Accounts receivable * Turnover ratio

= \$7,000,000 * 12

= \$84,000,000

2.Variable cost = Sales * (1-contribution rate)

= \$84,000,000 * (1-40%)

= \$84,000,000 * 60%

= \$50,400,000

3.Fixed costs = Sales * (1-operating profit) - Variable costs

= \$84,000,000 * (1-30%) - \$50,400,000

= \$84,000,000 * 70% - \$50,400,000

= \$58,800,000 - \$50,400,000

= \$8,400,000

4.Interest = Sales * operating profit / interest coverage ratio

= \$84,000,000 * 30% / 5

= \$5,040,000

Know the answer?
Your Answer:

#### Post as a guest

Your Name:

What's your source?

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Not the answer you're looking for?
Ask your own homework help question
ADVERTISEMENT
##### Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

ADVERTISEMENT