Calculating Retained Earnings from Pro Forma Income
Consider the following income statement for the Heir Jordan Corporation:
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HEIR JORDAN CORPORATION Income Statement |
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Sales |
$24,000 |
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Costs |
13,500 |
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Taxable income |
$10,500 |
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Taxes (34%) |
3,570 |
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Net income |
$ 6,930 |
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Dividends |
$2,426 |
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Addition to retained earnings |
4,504 |
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A20 percent growth rate in sales is projected. Prepare a pro forma income statement assuming costs vary with sales and the dividend payout ratio is constant. What is the projected addition to retained earnings?