Ch 03: Assignment Financial Statements, Cash Flow, and Taxes 3. Income statement The income statement, also known as the profit and loss (PSL) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm's gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm's revenues and expenses to the period in which they were incurred, not necessarily when cash was received or paid Investors and analysts use the information given in the income statement and other financial statements and reports to evaluate the company's financial performance and condition. Consider the following scenario: Cute Camel Woodcraft Company's income statement reports data for its first year of operation. The fem's CEO would like sales to increase by 25% next year ory 1. Cute Camel is able to achieve this level of increased sales, but its interest couts increase from 10% to 15% of earnings before interest and taxes (EBIT). 2. The company's operating costs (excluding depreciation and amortization) remain at 65% of net sales, and its deprecation and amortization expenses remain constant from year to year 3. The company's tax rate remains constant 25% of its pre tax income or earnings before taxes (ET) 4. In Year 2, Cute Camel expects to pay $100,000 and 51,773,1141 of preferred and common stock dividends, respectively Complete the Year 2 income statement data for Cute Camel, the answer the questions that follow. Be sure to round each dollar value to the nearest whole dolar Net sales Less: Operating costs, except depreciation and amortization Less: Depreciation and amortization expenses Operating income (or EBIT) Less: Interest expense Pre-tax income (or EBT) Lessi Taxes (25) Earnings after taxes Less: Preferred stock dividends Earnings available to common shareholders Less Common stock dividends Contribution to retained earrings Cute Camel Woodcraft Company Income Statement for Year Ending December 31 Year 1 Year 2 (Forecasted) $20,000,000 $ 13,000,000 800,000 800,000 $6,200,000 620,000 5,580,000 1,395,000 $4,185,000 100,000 4,085.000 1,464,750 $2.620,250 $3,194,281 Given the results of the previous income statement calculations, complete the following statements: In Year 2, Cute Camel has 10,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive in annual dividends. . If Cute Camel has 500,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from in Year 1 to in Year 2 Cute Camel's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from in Year 1 to in Year 2 to say that Cute Camel's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $2,620,250 and $3,194,281, respectively. This because of the items reported in the income statement involve payments and receipts of cash