Calculating Retained Earnings from Pro Forma Income [LO1] Consider the following income statement for the Heir Jordan Corporation:
HEIR JORDAN CORPORATION Income Statement | ||
Sales |
| $ 38,000 |
Costs |
| 18,400 |
Taxable income |
| $ 19,600 |
Taxes (34%) |
| 6,664 |
Net income |
| $ 12,936 |
Dividends | $ 5,200 |
|
Addition to retained earnings | 7,736 |
|
A 20 percent growth rate in sales is projected. Prepare a pro forma income statement assuming costs vary with sales and the dividend payout ratio is constant. What is the projected addition to retained earnings?
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