Consider the following financial statement for Heir Jordan Corporation. HEIR JORDAN CORPORATION Income Statement Sales $ 48,500 Costs 34,500 Taxable income $ 14,000 Taxes (35%) 4,900 Net income $ 9,100 Dividends $ 2,900 Addition to retained earnings 6,200 A 20% growth rate in sales is projected. Prepare a pro forma income statement and balance sheet assuming that costs, assets and accounts payable vary with sales, but notes payable do not. Further assume that the dividend payout ratio remains constant.

HEIR JORDAN CORPORATION

Income Statement

Sales $ 48,500 * 120%58,200

Costs 34,500 * 120%41,400

Taxable income $ 14,00016,800

Taxes (35%) 4,900 5,880

Net income $ 9,100 10,920

Dividends $ 2,900 ..(31.87%)3,480

Former Addition to retained earnings 6,200

New Addition to retained earnings 7,440

Explanation:

Consider the following financial statement for Heir Jordan Corporation.

HEIR JORDAN CORPORATION

Income Statement

Sales $ 48,500 * 120%58,200

Costs 34,500 * 120%41,400

Taxable income $ 14,00016,800

Taxes (35%) 4,900 5,880

Net income $ 9,100 10,920

Dividends $ 2,900 ..(31.87%)3,480

Former Addition to retained earnings 6,200

New Addition to retained earnings 7,440

Pay out ratio is 31.87% of Net income which is derived by Dividends/Net Income

answer(d) encourage cooperation by improving the chances of mutually agreeable transactions;