Share
Explore BrainMass

Financial Management: Preparing Income Statements

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 $

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