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What is the projected addition to retained earnings

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Reference no: EM133019011

Question - You have recently been hired as a Manager by FishQueen Corp, a major multination corporation, after graduating from Humber College. You got this job as a result of being a very ethical student who never cheated on any mid term exam. You find it shameful when students cheat, as it devalues the program.

The following is the most recent Statement of Comprehensive Income for FishQueen Corp.

Sales - $47,000

Cost of Goods - 31,300

Taxable Income - 15,700

Taxes - 5,495

Net Income - $10,205

Dividends - $2,900

Retained Earnings - $7,305

The CFO asks you to put together a forecasted income statement for next year projecting a 20% increase in sales. The CFO instructs you to assume that costs will vary with sales and that the dividend payout ratio will remain constant, with the tax rate increasing to forty percent next year.

i. What is the projected addition to retained earnings? Show all your work by completing a Statement of Comprehensive Income for next year, in good form with proper dates and titles.

ii. If the CFO wants to have $8,500 in addition to Retained Earnings next year, what should the Dividend Payout Ratio be?

Reference no: EM133019011

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