Fixed operating costs, except depreciation and amortization
(11,250,000)
(9,000,000)
Depreciation and amortization expenses
(600,000)
(600,000)
Net operating income (or EBIT)
6,900,000
$5,400,000
Interest
(1,035,000)
(540,000)
Earnings before taxes (or EBT)
5,865,000
$4,860,000
Taxes (40%)
(2,346,000)
(1,944,000)
Net Income
3,519,000
$2,916,000
Preferred dividends
(200,000)
(200,000)
Earnings available to common stockholders (EAC)
3,319,000
$2,716,000
Common dividends
(1,055,700)
(874,800)
Addition to retained earnings
$2,263,300
$1,841,200
It is A___________to say that Cute Camels net inflows and outflows of cash at the end of Years 1 and 2 are equal to the companys annual contribution to retained earnings, $1,841,200 and $2,263,300, respectively. This is because B____________ of the items reported in the income statement involve payments and receipts of cash.
Options for A
incorrect
correct
Options for B
all but one
all
Answer & Explanation
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