Consider the following income statement for the Heir Jordan Corporation: HEIR JORDAN CORPORATION Income Statement Sales $ 47,900 Costs 33,900 Taxable income $ 14,000 Taxes (21%) 2,940 Net income $ 11,060 Dividends $ 2,300 Addition to...

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Consider the followingincome statement for the Heir Jordan Corporation:
HEIR JORDAN CORPORATION
Income Statement
  Sales $ 47,900
  Costs 33,900
  Taxable income $ 14,000
  Taxes (21%) 2,940
  Netincome $ 11,060
     Dividends $ 2,300
     Addition to retained earnings 8,760
The projected salesgrowth rate is 12 percent.
Prepare a pro formaincome statement assuming costs vary with sales and the dividendpayout ratio is constant.

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3.7 Ratings (309 Votes)

	Given that
	HEIR JORDAN CORPORATION
	Income Statement
	Sales		47,900
	Costs		33,900
	Taxable income		14,000
	Taxes (21%)		2,940
	Net income		11,060
	Dividends	$	2,300
	Addition to retained earnings		8,760

	Cost as % of sales = 33900/47900		70.77%
	Dividend payout ratio =2300/11060		20.80%

	Performa statement
	HEIR JORDAN CORPORATION
	Income Statement
i	Sales	47900*112%	53,648
ii=70.77% *i	Costs		37,968
iii=i-ii	Taxable income		15,680
iv=iii*21%	Taxes (21%)		3,293
v=iii-iv	Net income		12,387
vi=v*20.80%	Dividends	$	2,576
vii=v-vi	Addition to retained earnings		9,811

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Transcribed Image Text

Consider the followingincome statement for the Heir Jordan Corporation:HEIR JORDAN CORPORATIONIncome Statement Sales$47,900 Costs33,900 Taxable income$14,000 Taxes (21%)2,940 Netincome$11,060 Dividends$2,300 Addition to retained earnings8,760The projected salesgrowth rate is 12 percent.Prepare a pro formaincome statement assuming costs vary with sales and the dividendpayout ratio is constant.

HEIR JORDAN CORPORATION Income Statement
Sales			$	47,900
Costs				33,900

Taxable income			$	14,000
Taxes (21%)				2,940

Netincome			$	11,060

Dividends	$	2,300
Addition to retained earnings		8,760