Use the percent-of-sales method to prepare a pro forma income statement for the year ended December...
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Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020, for Saw Lumber, Inc. Saw Lumber, Inc. estimates that its sales in 2020 will be $4,500,000. Interest expense is to remain unchanged at $105,000 and the firm plans to pay cash dividends of $150,000 during 2020. The income statement for the year ended December 31, 2019 is shown below. Income Statement Saw Lumber, Inc. For the Year Ended December 31, 2019 Sale revenue Less: Cost of goods sold Gross profits Less Operating expenses Operating profits Less: Interest expense Net income before taxes 315,000 Less: Taxes (40%) 126,000 Net income after taxes 189,000 Less: Cash dividends 120,000 To: Retained earnings 69,000 Based on your calculations, how is the accumulated retained earnings account on the pro forma balance sheet projected to change between 2019 and 2020? A. Decrease by $57,000 from the prior year. B. Decrease by $52,500 from the prior year. C. Increase by $57,000 from the prior year. D. Increase by $52,500 from the prior year. $4,200,000 3,570,000 630,000 210,000 420,000 105,000 Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020, for Saw Lumber, Inc. Saw Lumber, Inc. estimates that its sales in 2020 will be $4,500,000. Interest expense is to remain unchanged at $105,000 and the firm plans to pay cash dividends of $150,000 during 2020. The income statement for the year ended December 31, 2019 is shown below. Income Statement Saw Lumber, Inc. For the Year Ended December 31, 2019 Sale revenue Less: Cost of goods sold Gross profits Less Operating expenses Operating profits Less: Interest expense Net income before taxes 315,000 Less: Taxes (40%) 126,000 Net income after taxes 189,000 Less: Cash dividends 120,000 To: Retained earnings 69,000 Based on your calculations, how is the accumulated retained earnings account on the pro forma balance sheet projected to change between 2019 and 2020? A. Decrease by $57,000 from the prior year. B. Decrease by $52,500 from the prior year. C. Increase by $57,000 from the prior year. D. Increase by $52,500 from the prior year. $4,200,000 3,570,000 630,000 210,000 420,000 105,000
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Answer Solution For the year ended December 31 2020 Sales Revenue Less Cost of goods sold ... View the full answer
Related Book For
Principles Of Managerial Finance
ISBN: 978-0136119463
13th Edition
Authors: Lawrence J. Gitman, Chad J. Zutter
Posted Date:
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