1) What is the purpose preparing the pro-forma financial statement? (b) The marketing department ofZetoraManufacturing estimates that...
Question:
(b) The marketing department of Zetora Manufacturing estimates that its sales in 2019 will be $1,500,000.
Interest expense is expected to remain unchanged at $36,000, and the firm plans to pay $70,000 in cash dividends during 2019.
Table 1: Zetora Manufacturing Income Statement for the Year Ended December 31, 2018
Sales revenue | $ 1,406,000 |
Less: Cost of goods sold | 908,000 |
Gross profits | $ 498,000 |
Less: Operating expenses | 115,000 |
Operating profits | $ 383,000 |
Less: Interest expense | 36,000 |
Net profits before taxes | $ 347,000 |
Less: Taxes (rate = 40%) | 138,800 |
Net profits after taxes | $ 208,200 |
Less: Cash dividends | 67,000 |
Total retained earnings | $ 141,200 |
Given the information above, use the percentage of sales method to prepare a pro forma income statement for the year ended December 31, 2019
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter