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Forecasting Net Income for Herbat Housing Corporation

Q4
The company is in the 40 percent tax bracket. Its cost of goods sold always represents 60 percent of its sales. That is, if the company's sales were to increase to RM1.5 million, its cost of goods sold would increase to RM900,000.

Q5
The company's CEO is unhappy with the forecast and wants the firm to achieve a net income equal to RM240,000. Assume that Hebat's interest expense remains constant. At what level of sales the company has to achieve it wants to obtain this net income.

Q6
Nilai Services Bhd. reported RM2.3 million of retained earnings on its balance sheet last year. This year, the company has incurred a loss of RM500,000 (negative RM500,000). Despite the loss, the company still paid RM1.00 dividend per share this year. The company's earnings per share for this year were -RM2.50 (negative RM2.50). What was the level of retained earnings on the company's balance sheet this year?

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Q4 Partial Income Statement: Sales and COGS of Hebat Housing
The company is in the 40 percent tax bracket. Its cost of goods sold always represents 60 percent of its sales. That is, if the company's sales were to increase to RM1.5 million, its cost of goods sold would increase to RM900,000.
The partial income statement below has been constructed based on the assumption that the problems #589390 Q3, and #589391 Q4 and Q5 belong together. Note that the income statement does not include all regular items, such as fixed costs or depreciation; these items were not given and they are not necessary for understanding the logic of the problem.
Cost of Goods Sold = COGS = (0.60)*RM1.5 million = RM900,000

Q5 Partial Income Statement: Net Income of Hebat Housing
The company's CEO is unhappy with the forecast and wants the firm to achieve a net income equal to RM240,000. Assume that ...

Solution Summary

This solution includes forecasting the net income for Hebat Housing Corporation. The forecast is done by constructing a partial income statement, based on given information. In addition, a statement of stockholders' equity is constructed for Nilai Services Bhd.

$2.19