Last year, stevens inc. had sales of $399 comma 000, with a cost of goods sold of $113 comma 000. the firm's operating expenses were $ 127 comma 000, and its increase in retained earnings was $53 comma 000. there are currently 21 comma 800 common stock shares outstanding and the firm pays a $1.63 dividend per share. a. assuming the firm's earnings are taxed at 34 percent, construct the firm's income statement. b. compute the firm's operating profit margin. c. what was the times interest earned?

a) Net Sales                       $399,000

Cost of goods sold       $113,000

Gross profit                   $286,000             ( Net sales - Cost of goods sold )

operating expenses     $ 127,000

Operating income        $159,000              (Gross profit - Operating expenses)

interest expense          $24,857.58    (Operating income - Income before tax)

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b) 39.85%

c) 6.39

Explanation:

Given;

Sales = $399,000

Cost of goods sold = $113,000

firm's operating expenses = $ 127,000

increase in retained earnings = $53,000

common stock shares outstanding = 21,800

Dividends paid per share = $1.63

Thus,

Dividends = 21,800 × $1.63 = $35,534

Net income = Dividends + increase in retained earnings

= $35,534 + $53,000

= $88,534

Now,

income before taxes =

or

income before taxes =

= $134142.42

Thus,

Taxes = $134142.42 - $88,534 = $45,608.42

a)

Net Sales                       $399,000

Cost of goods sold       $113,000

Gross profit                   $286,000             ( Net sales - Cost of goods sold )

operating expenses     $ 127,000

Operating income        $159,000              (Gross profit - Operating expenses)

interest expense          $24,857.58    (Operating income - Income before tax)

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b) operating profit margin =

or

operating profit margin =

or

operating profit margin = 39.85%

c) Times interest earned =

or

Times interest earned =

income before interest expense and taxes/interest expense

= 6.39

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