1. Given the following information, prepare in good form an income statement for Jonas Brothers Cough Drops. Take your calculations through Earnings After Taxes

Selling and administrative expense........................................... $ 328,000

Depreciation expense....................................................................... 195,000 Sales......................................................................................................... 1,660,000

Interest expense................................................................................. 129,000

Cost of goods sold.............................................................................. 560,000 Taxes........................................................................................................ 171,000

2. Simpson Glove Company has made the following sales projections for the next six months. All sales are credit sales.

March..................................... $41,000

April ....................................... 50,000

May......................................... 32,000

June ........................................ 47,000

July.......................................... 58,000

August................................... 62,000

Sales in January and February were $41,000 and $39,000, respectively. Experience has shown that of total sales receipts 10 percent are uncollectible, 40 percent are collected in the month of sale, 30 percent are collected in the following month, and 20 percent are collected two months after sale.

Prepare a monthly cash receipts schedule for the firm for March through August.

3. The Harding Company manufactures skates. The companys income statement for 20X1 is as follows: HARDING COMPANY Income Statement

For the Year Ended December 31, 20X1 Sales

(10,500 skates @ $60 each) ................................ $630,000

Less: Variable costs (10,500 skates at $25).................. 262,500

Fixed costs................................................................ 200,000

Earnings before interest and taxes (EBIT) ................... 167,500

Interest expense ............................................................ 62,500

Earnings before taxes (EBT) ........................................ 105,000

Income tax expense (30%) ........................................... 31,500

Earnings after taxes (EAT)........................................... $ 73,500

Given this income statement, compute the following:

a. Degree of operating leverage.

b. Degree of financial leverage.

c. Degree of combined leverage.

d. Break-even point in units (number of skates).

4. Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $150,000. The company can borrow $150,000 for three years at 10 percent annual interest or for one year at 8 percent annual interest.

How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 8 percent rate? Compare this to the 10 percent three-year loan. What if interest rates on the 8 percent loan go up to 13 percent in year 2 and 18 percent in year 3? What would be the total interest cost compared to the 10 percent, three-year loan?

5. Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of $8 per order, and carrying costs of $1.60 per unit.

a. What is the economic ordering quantity?

b. How many orders will be placed during the year?

c. What will the average inventory be?

d. What is the total cost of ordering and carrying inventory?