P4-15 Pro forma income statement The marketing department of Metroline Manufactu
ID: 2752165 • Letter: P
Question
P4-15 Pro forma income statement The marketing department of Metroline Manufactur- ing estimates that its sales in 2016 will be $1.5 million. Interest expense is expected to remain unchanged at $35,000, and the firm plans to pay $70,000 in cash divi- dends during 2016. Metroline Manufacturing's income statement for the year ended December 31, 2015, and a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components are given below a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2016 year ended December 31, 2016 ment probably provides the better estimate of 2016 income? Explain why b. Use fixed and variable cost data to develop a pro forma income statement for the c. Compare and contrast the statements developed in parts a and b. Which state-Explanation / Answer
a) Following is Proforma Income Statement for the year 2016 of Metroline Manufacturing, Inc using Percentage to Sales Method
b) a) Following is Proforma Income Statement for the year 2016 of Metroline Manufacturing, Inc using Fixed and Variable Cost data
c)The pro forma income statement developed using the fixed and variable cost data projects a higher net profit after taxes due to lower cost of goods sold and operating expenses. Although the percent of-sales method projects a more conservative estimate of net profit after taxes, the pro forma income statement that classifies fixed and variable cost is more accurate.
INCOME STATEMENTFOR THE YEAR 2015 PARTICULARS AMOUNT $ % of Sale Sales Revenue 1400000 100.00 Less: Cost Of Goods Sold 910000 65.00 Gross Profit 490000 35.00 Less:Operating Expenses 120000 8.57 Operating Profits 370000 26.43 Less: Interest Expenses 35000 2.50 Net Profits Before Taxes 335000 23.93 Less:Taxe Rate 40% 134000 9.57 Net Profits After Taxes 201000 14.36 Less: Cash Dividends 66000 4.71 To Retained Earnings 135000 9.64Related Questions
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