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
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$24,000
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Costs
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13,500
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Taxable income
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$10,500
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Taxes (34%)
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3,570
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Net income
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$ 6,930
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Dividends
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$2,426
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Addition to retained earnings
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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?