114. The following is the December 31, 2006 balance sheet for the Epics Corporation. Assets Cash Accounts Receivable Inventory Total Current Assets Liabilities $ 70,000 Accounts Payable 150,000 Notes Payable 280.000 Bonds Payable $ 500,000 Total Liabilities $ 100,000 120,000 300.000 $ 520,000 Plant and Equipment $1,250,000 Equity Less: Accum. Deprec. 2.50,000 Common Stock 300,000 Net plant and Equipment $1,000,000 Paid In Capital 200,000 Retained Earnings 480.000 Total Assets $1,500,000 Total Equity $ 980,000 Total Liab. & Equity $1,500,000 Sales for 2006 were $2,000,000, with the cost of goods sold being 55% of sales. Depreciation expense was 10% of the gross plant and equipment at the beginning of the year. Interest expense was 9% on the notes payable and 11% on the bonds payable. Selling and administrative expenses were $200,000 and the firm's tax rate is 40%. Prepare an income statement. Difficulty: Medium Answer: Income Statement Sales Less: Cost of Goods Sold Gross Profit Less: Selling and Administrative Expense Depreciation expense EBIT Less: Interest Expense (10,800 + 33.000) EBT Less: Taxes (40%) Net Earnings $ 318,720