Pro Forma Income Statements Assignment | Homework For You
January 24th, 2020
| The most recent financial statements for Scott, Inc., appear below. Interest expense will remain constant; the tax rate and the dividend payout rate also will remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. Assume the firm is operating at full capacity and the debt-equity ratio is held constant. |
| SCOTT, INC. 2019 Income Statement |
||||||
| Sales | $ | 756,000 | ||||
| Costs | 612,000 | |||||
| Other expenses | 25,500 | |||||
| Earnings before interest and taxes | $ | 118,500 | ||||
| Interest expense | 11,200 | |||||
| Taxable income | $ | 107,300 | ||||
| Taxes (23%) | 24,679 | |||||
| Net income | $ | 82,621 | ||||
| Dividends | $ | 41,340 | ||||
| Addition to retained earnings | 41,281 | |||||
| SCOTT, INC. Balance Sheet as of December 31, 2019 |
|||||||
| Assets | Liabilities and Owners’ Equity | ||||||
| Current assets | Current liabilities | ||||||
| Cash | $ | 24,540 | Accounts payable | $ | 58,600 | ||
| Accounts receivable | 33,890 | Notes payable | 15,500 | ||||
| Inventory | 70,790 | Total | $ | 74,100 | |||
| Total | $ | 129,220 | Long-term debt | $ | 104,000 | ||
| Owners’ equity | |||||||
| Fixed assets | Common stock and paid-in surplus | $ | 99,000 | ||||
| Net plant and equipment | $ | 213,000 | Retained earnings | 65,120 | |||
| Total | $ | 164,120 | |||||
| Total assets | $ | 342,220 | Total liabilities and owners’ equity | $ | 342,220 | ||
| Complete the pro forma income statements below. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) |
| Pro – Forma Income Statement | |||
| 10% Sales Growth | 15% Sales Growth | 40% Sales Growth | |
| Sales | |||
| Costs | |||
| Other Expenses | |||
| EBIT | |||
| Interest Expense | |||
| Taxable Income | |||
| Taxes (23%) | |||
| Net Income | |||
| Dividends | |||
| Add to RE | |||
| Calculate the EFN for 10, 15 and 40 percent growth rates. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.) |
| 10% | 15% | 40% | |
| EFN |
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