Question

Consider the following income statement for the Heir Jordan Corporation: HEIR JORDAN CORPORATION Income Statement Sales $ 47,600 Costs 35,600 Taxable income $ 12,000 Taxes (24%) 2,880 Net income $ 9,120 Dividends $ 2,000 Addition to retained earnings 7,120 The projected sales growth rate is 20 percent. Prepare a pro forma income statement assuming costs vary with sales and the dividend payout ratio is constant. (Input all answers as positive values. Do not round intermediate calculations.)

Answer 1

$10,944

Step-by-step explanation:

Preparation of a pro forma income statement assuming costs vary with sales and the dividend payout ratio is constant

PROFORMA INCOME STATEMENT.

Sales $57,120

(1.20* $ 47,600)

Less Costs $42,720

($35,600/$47,600)*$57,120

Taxable Income $14,400

($57,120-$42,720)

Taxes $3,456

(24%*$14,400)

Net Income $10,944

($14,400-$3,456)

Therefore pro forma income statement assuming costs vary with sales and the dividend payout ratio is constant will be $10,944.