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ElectroWizard Company produces a popular video game called Destructo which sells for $32. Last year ElectroWizard sold 50,000 Destructo games, each of which costs $6 to produce. ElectroWizard incurred selling and administrative expenses of $80,000 and depreciation expense of $10,000. In addition, ElectroWizard has a $100,000 loan outstanding at 12%. Their tax rate is 40%. There are 100,000 common shares outstanding.

Required:
Prepare an income statement for Electro Wizard in good form and include earnings per share (EPS)

Respuesta :

Tundexi

Answer:

              Income Statement for Electro-Wizard Company  

Particulars                                                                           Amount

Sales (50,000 units*$32)                                                  $1,600,000

Cost of production (50,000 units*$6)                              ($300,000)

Net contribution                                                                 $1,300,000  

Selling and administration expenses       ($80,000)

Depreciation expense                               ($10,000)

Total Operating Expenses                                                 $90,000

Operating Income                                                               $1,210,000

Interest expense ($100,000*12%)                                      ($12,000)

Taxable Income                                                                   $1,198,000  

Taxes (1,198,000*40%)                                                        ($479,200)

Net Income                                                                           $718,800

Earnings per share = Net Income/ Outstanding common shares

Earnings per share = $718,800 / 100,000 shares

Earnings per share = $7.18 per share

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