Percentage of sales method

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Reference no: EM131806052

Pro forma income statement: Bells manufacturing estimates that the sakes for 2016 financial year will be $2.25 million. No new borrowing was obtained and, therefore, the interest remained unchanged at $24,500. Bell manufacturing is planning on paying cash dividends of $85,000 during 2016. Refer to the financial data in table while answering the following :

A. Compile the pro forma income statement for the year ended december 31, 2016, using the percentage of sales method

B. Compile the pro forma income statement for the year ended december 31, 2016 using fixed and variable cost data

Bell Manufacturing

Income statement for the year ended

Ended december 31,2015

Sales revenue $1,800,000

Less: COGS 1,100,000

Gross profit $700,000

Less: operating expense 450.000

Operating profit $250,000

Less: Interest expense 24,500

Net profit before taxes $225,500

Less: Taxes (40%) 90,000

Net profit after taxes $135,300

Less: cash dividens 85,000

To retained earnings $50,300

Bell Manufacturing

Breakdown of cost and Expense Into fixed and Variable Components

For the year ended December 31, 2015

COGS

Fixed cost $750,000

Variable cost 350,000

Total costs $1,100,000

Operating expenses

Fixed expnse $155,000

Variabl expense $295,000

Total expense $450,000

Reference no: EM131806052

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