ulatogra.cby/ultra/courses/ 59446_1/cly/outline hen the No results Options Remai

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ulatogra.cby/ultra/courses/ 59446_1/cly/outline hen the No results Options Remaining Time: 1 hour, 43 minutes, 29 seconds. Question Completion Status: QUESTION 29 (5 points) Income Statement Huddleston Manufacturing Company For the Year Ended December 31, 2012 Sales Less: Cost of goods sold Gross profits Less: Operating expensers Operating Profits Less: Interest expense Net profits before taxes Less: Taxes (40%) Net profits after taxes Less: Cash Dividends To: Retained earnings Huddleston Manufacturing estimates its sales in 2013 will be $3 million Interest expense is expected to remain unchanged at $70,000, and the firm plans to pay cash dividends of $1-40,000 during 2013. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2013, based $2,800,000 1820,000 980000 240,000 S 740,000 70,000 S 670,000 268.000 s 402,000 132000 s 270,000 on the 2012 income statement shown above TTTT Paragraph Arial 12pn //...- . IE. T-2..g í 2

Explanation / Answer

Cost of goods sold as % of sales = $1,820,000 / $2,800,000 = 0.65 or 65%

Operating expense as % of Sales = $240,0000 / $2,800,000 = 0.08571428571 or 8.571428571%

Note: Figures are rounded off to the nearest dollar.

Sales 3,000,000 Less: Cost of goods sold (3,000,000 x 65%) 1,950,000 Gross Profit 1,050,000 Less: Operating Expenses (3,000,000 x 8.571428571%) 257,143 Operating Profits 792,857 Less: Interest expense 70,000 Net profits before taxes 722,857 Less: Taxes @40% 289,143 Net profits after taxes 433,714 Less: Dividends 140,000 To Retained Earnings 293,714

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