E3–1 You are a summer intern at the office of a local tax preparer. To test your basic knowledge of financial statements, your manager, who graduated from your alma mater 2 years ago, gives you the following list of accounts and asks you to prepare a simple income statement using those accounts.

a. Arrange the accounts into a well-labeled income statement. Make sure you label and solve for gross profit, operating profit, and net profit before taxes.

b. Using a 35% tax rate, calculate taxes paid and net profit after taxes.

c. Assuming a dividend of $1.10 per share with 4.25 million shares outstanding, calculate EPS and additions to retained earnings.

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Accounts Depreciation General and administrative expenses Sales Sales expenses Cost of goods sold Lease expense Interest expense ($000,000) 25 22 345 18 255 43