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    Financial Management: Preparing Income Statements

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    Consider the following income statement for the Heir Jordan Corporation:

    HEIR JORDAN CORPORATION
    Income Statement
    Sales $43,800
    Costs 34,800
    Taxable income $9,000
    Taxes (35%) 3,150
    Net income $5,850
    Dividends $3,300
    Addition to retained earnings 2,550

    The projected sales growth rate is 12 percent.

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

    HEIR JORDAN CORPORATION
    Pro Forma Income Statement
    Sales $
    Costs
    Taxable income $
    Taxes
    Net income $

    What is the projected addition to retained earnings?

    Retained earnings $

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    https://brainmass.com/business/financial-statements/financial-management-preparing-income-statements-548392

    Solution Preview

    Payout Ratio=3300/5850=56.41%

    Pro Forma Income Statement
    Sales 43800*(1+12%) ...

    Solution Summary

    Solution prepares a pro forma income statement with the help of given projections. It also calculates the net addition to the retained earnings.

    $2.19

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