Stork Freight Company owns and operates 15 planes that deliver packages worldwide. The planes were purchased on
Question:
Stork Freight Company owns and operates 15 planes that deliver packages worldwide. The planes were purchased on January 1, 2014, for $1 million each. The company estimates that the planes will be scrapped after 12 years. Stork Freight uses straight-line depreciation.
a. Assume that in a typical year the company generates sales of $50 million and operating expenses (excluding depreciation expense) of $25 million. Prepare an income statement for a typical year (exclude depreciation expense).
b. Assume that the company had originally estimated the useful life at six years instead of twelve. Prepare an income statement for a typical year. What is the percent change in net income?
c. Assume that the company policy is to pay dividends in the amount of 30 percent of net income. Compute the difference in the dividend payment between the two cases above.
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
a and b In a typical year excluding depreciation expense net income would be as follows 25 million n...View the full answer
