HEIR JORDAN CORPORATION Income Statement $45,600 35,200 Sales Costs Taxable inco

Question

HEIR JORDAN CORPORATION Income Statement $45,600 35,200 Sales Costs Taxable income Taxes (22%) Net income $10,400 2,288 $ 8,112 Dividends Addition to retained $2,200 5,912 earnings The projected sales growth rate is 18 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.) HEIR JORDAN CORPORATION Pro Forma Income Statement Sales Costs Taxable income Taxes Net income

Explanation / Answer

Dividend payout ratio=Dividend payout/Net income

=(2200/8112)=0.271203155

Hence dividends would be=$9572.16*0.271203155

=$2596

Hence addition to retained earnings would be=(9572.16-2596)=$6976.16

Sales(45600*1.18) $53808 Costs(35200*1.18) $41536 Taxable income $12272 Taxes(22%) $2699.84 Net income $9572.16

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