Question

​(Related to Checkpoint​ 4.3) ​ (Profitability analysis)  Last year the P. M. Postem Corporation had sales of $443,000​, with a cost of goods sold of $114,000. The​ firm's operating expenses were $126,000​, and its increase in retained earnings was $97,630. There are currently 22,000 shares of common stock​ outstanding, the firm pays a $1.56 dividend per​ share, and the firm has no​ interest-bearing debt

.a.  Assuming the​ firm's earnings are taxed at 35 ​percent, construct the​ firm's income statement.

b.  Compute the​ firm's operating profit margin.

a.  Assuming the​ firm's earnings are taxed at 35%​, construct the​ firm's income statement.

Complete the income statement​ below:

Income Statement
Revenues	$
Cost of Goods Sold
Gross Profit	$
Operating Expenses
Net Operating Income	$
Interest Expense
Earnings before Taxes	$
Income Taxes
Net Income	$

Answer 1

a.

The firm has no​ interest-bearing debt, so there will be no interest expense. Dividend paid by the firm is not an expense and is therefore not included in the income statement.

Income Statement is as follows:

Formulas:

b.

Operating profit margin= Operating profit/Sales

= $203,000/$443,000

= 45.82%