Thanks for the help, having a lot of trouble with this question.
3. Income statement MAE: The income statement, also known as the prot and loss (PM) statement, provides a snapshot of the financial performance of' a company during a specied 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: Blue Hamster Manufacturing Inc.'s income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% next yeah 1. Blue Hamster 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 (exduding depreciation and amorzation) remain at 70% of net sales, and its depreciation and amortization emenses 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, Blue Hamster expects to pay $100,000 and $633,400 of preferred and common stock dividends, respectively. Complete the Year 2 inoome statement data for Blue Hamster, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Blue Hamster Manufacturing Inc. Income Statement for Year Ending December 31 Year 2 Year 1 [FL-recanted) Net sales 3; 10,000,000 Less: Operating oosts, except depreciation and amortization ?,000,000 Less: Depreciation and amortization expenses 400,000 400,000 Operating income {or EBlT) $2,600,000 Less: Interest expense 260,000 Pre-tax inoome {or EBT) 2,3 40,000 Less: Taxes (40%} 936,000 Earnings after taxes $1,404,000 Less: Preferred stock dividends 100,000 Earnings available to oommon shareholders 1,304,000 Less: Common stock dividends 561,600 Contribution to retained earnings $?42,400 $925,100 Given the results of the previous inoome statement calculations. oomplete the following statements: - In Year 2, if Blue Hamster has 5,000 shares of preferred stock issued and outstanding. then each preferred share should expect to receive in annual dividends. - If Blue Hamster has 400,000 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. Blue Hamster's before interest, taxes. depreciatiun and amortization (EEITDA) value changed item in Year 1 to in Year 2. It is to say that Blue Hamster's net inows and outows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $742,400 and $925,100, respectively. This is because of the item reported in the inmme statement involve payments and receipts of cash
