You are a summer intern at the office of a local tax preparer. To test your basic knowledge of financial statements, your manager, who graduated from your alma mater 2 years ago, gives you the following list of accounts and asks you to prepare a simple income statement using those accounts.

Accounts ($000,000)

Depreciation ............. 25

General and administrative expenses .. 22

Sales ................ 345

Sales expenses ............ 18

Cost of goods sold ......... 255

Lease expense ........... 4

Interest expense ........... 3

a. Arrange the accounts into a well-labeled income statement. Make sure you label and solve for gross profit, operating profit, and net profit before taxes.

b. Using a 35% tax rate, calculate taxes paid and net profit after taxes.

c. Assuming a dividend of $1.10 per share with 4.25 million shares outstanding, calculate EPS and additions to retained earnings.