Green Caterpillar Garden Supplies Inc.

Income Statement for Year Ending December $31$

Given the results of the previous income statement calculations, complete the following statements:

In Year $2,$ if Green Caterpillar has $10,000$ shares of preferred stock issued and outstanding, then each preferred share should expect to receive

in annual dividends.

If Green Caterpillar 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 $2.$

Green Caterpillar's before interest, taxes, depreciation and amortization $($EBITDA$)$ value changed from

$\text{'}.$ in Year $1$ to

in Year $2.$

It is

to say that Green Caterpillar'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, $$1,842,762$ and $$2,610,012,$ respectively. This is because

of the items reported in the income

statement involve payments and receipts of cash. $3.$ Income statement

The income statement, also known as a profit and loss $($P&L$)$ statement, provides a snapshot of a company$$s financial performance during a specified period of time. It reports a firm$$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$$s revenues and expenses to the period in which they are incurred, not necessarily when cash is received or paid. Investors and analysts use the information presented in the income statement, and the other financial statements and reports, to evaluate the company$$s financial performance and condition.

Consider the following scenario:

Green Caterpillar Garden Supplies Inc.$$s income statement reports data for its first year of operation. The firm$$s CEO would like sales to increase by $25\%$ next year.

$1.$ Green Caterpillar is able to achieve this level of increased sales, but its interest costs increase from $10\%$ to $15\%$ of earnings before interest and taxes $($EBIT$).$

$2.$ The company$$s operating costs $($excluding depreciation and amortization$)$ remain at $75\mathrm{.}00\%$ of net sales, and its depreciation and amortization expenses remain constant from year to year.

$3.$ The company$$s tax rate remains constant at $40\%$ of its pre$-$tax income or earnings before taxes $($EBT$).$

$4.$ In Year $2,$ Green Caterpillar expects to pay $$100,000$ and $$1,459,238$ of preferred and common stock dividends, respectively.

Complete the Year $2$ income statement data for Green Caterpillar, then answer the questions that follow. Round each dollar value to the nearest whole dollar.