Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 4, Problem 4.16P
Learning Goal 5
P4-16 Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be 51.5 million. Interest expense is expected to remain unchanged at $35,000, and the firm plans to pay $70,000 in cash dividends during 2020. Metroline Manufacturing’s income statement for the year ended December 31, 2019, and a breakdown of the firm’s cost of goods sold and operating expenses into their fixed and variable components are given below.
- a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020.
- b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2020.
- c. Compare and contrast the statements developed in parts a and b. Which statement probably provides the better estimate of 2020 income? Explain why. Metroline Manufacturing Income Statement for the Year Ended December 31, 2019
Sales revenue | $1,400,000 |
Less: Cost of goods sold | 910,000 |
Gross profits | $ 490,000 |
Less: Operating expenses | 120,000 |
Operating profits | $ 370,000 |
Less: Interest expense | 35,000 |
Net profits before taxes | $ 335,000 |
Less: Taxes (rate = 40%) | 134,000 |
Net profits after taxes | $ 201,000 |
Less: Cash dividends | 66,000 |
To |
$135,000 |
Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended
December 31, 2019
Cost of goods sold | |
Fixed cost | $210,000 |
Variable cost | 700,000 |
Total costs | $910,000 |
Operating expenses | |
Fixed expenses | $36,000 |
Variable expenses | 84,000 |
Total expenses | $120,000 |
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Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be $1.53 million. Interest expense is expected to remain unchanged at $35,000, and the firm plans to pay $65,000 in cash dividends during 2020.
Metroline Manufacturing's income statement for the year ended December 31, 2019, is given, along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components.
a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020.
b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2020.
c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of 2020 income? Explain why.
a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020.
Complete the pro forma income…
CAN SOMEONE HELP ME PREPARE A SCHEDULE VERTICAL ANALYSIS?
Operating data for Joshua Corporation are presented below.
2020
2019
Sales revenue
$754,000
$605,000
Cost of goods sold
465,218
392,645
Selling expenses
122,148
69,575
Administrative expenses
61,828
54,450
Income tax expense
33,176
21,780
Net income
71,630
66,550
Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in
2020
will be
$1.59
million. Interest expense is expected to remain unchanged at
$36,000,
and the firm plans to pay
$66,000
in cash dividends during
2020.
Metroline Manufacturing's income statement for the year ended December 31,
2019,
is given
LOADING...
,
along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components.
a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31,
2020.
b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31,
2020.
c. Compare and contrast the statements developed in parts a. and b. Which statement probably provides the better estimate of
2020
income? Explain why.
Chapter 4 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Ch. 4.1 - Prob. 4.1RQCh. 4.1 - Prob. 4.2RQCh. 4.2 - Briefly describe the first four modified...Ch. 4.2 - Describe the overall cash flow through the firm in...Ch. 4.2 - Prob. 4.5RQCh. 4.2 - 4-B Why is depreciation (as well as amortization...Ch. 4.2 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Learning Goal 5 E4-5 Rimier Corp. forecasts sales...Ch. 4 - Prob. 4.1PCh. 4 - Learning Goal 2 P4-2 Depreciation In early 2019,...Ch. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.11PCh. 4 - Learning Goal 4 P4-12 Cash budget: Advanced The...Ch. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Learning Goal 5 P4-16 Pro forma income statement...Ch. 4 - Learning Goal 5 P4-17 Pro forma income statement:...Ch. 4 - Learning Goal 5 P4-18 Pro forma balance sheet:...Ch. 4 - Learning Goal 5 P4-19 Pro forma balance sheet...Ch. 4 - Learning Goal 5 P4-20 Integrative: Pro forma...Ch. 4 - Learning Goal 5 P4-21 Integrative: Pro forma...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 1SE
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