Question

Your pro forma income statement shows sales of $1,036,000, cost of goods sold as $495,000, depreciation expense of $104,000, and taxes of $109,250 due to a tax rate of 25%. What are your pro forma earnings? What is your pro forma free cash flow? Complete the pro forma income statement below: (Round to the nearest dollar.)

Sales $___
Cost of Goods Sold $___
Gross Profit $___
Depreciation $___
EBIT $___
Taxes (25%) $___
Earnings $___

Answer 1

The pro forma earnings are $327,750, and the pro forma free cash flow is $114,500. The completed pro forma income statement is: Sales $1,036,000, Cost of Goods Sold $495,000, Gross Profit $541,000, Depreciation $104,000, EBIT $437,000, Taxes (25%) $109,250, Earnings $327,750.

Step-by-step explanation:

The pro forma earnings can be calculated by subtracting the cost of goods sold, depreciation expense, and taxes from the sales. In this case, the pro forma earnings would be $1,036,000 - $495,000 - $104,000 - $109,250 = $327,750.

The pro forma free cash flow can be calculated by subtracting the taxes and depreciation expense from the earnings. In this case, the pro forma free cash flow would be $327,750 - $109,250 - $104,000 = $114,500.

Completing the pro forma income statement:

1. Sales $1,036,000
2. Cost of Goods Sold $495,000
3. Gross Profit $541,000 ($1,036,000 - $495,000)
4. Depreciation $104,000
5. EBIT $437,000 ($541,000 - $104,000)
6. Taxes (25%) $109,250
7. Earnings $327,750 ($437,000 - $109,250)