Consider the following income statement for the Heir Jordan Corporation: HEIR JORDAN CORPORATIONIncome Statement Sales $ 47,600 Costs 35,600 Taxable income $ 12,000 Taxes (25%) 3,000 Net income $ 9,000 Dividends $ 2,505 Addition to retained earnings 6,495 The balance sheet for the Heir Jordan Corporation follows. HEIR JORDAN CORPORATIONBalance Sheet Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 2,050 Accounts payable $ 2,400 Accounts receivable 4,700 Notes payable 4,500 Inventory 6,400 Total $ 6,900 Total $ 13,150 Long-term debt $ 25,000 Owners’ equity Fixed assets Common stock and paid-in surplus $ 15,000 Net plant and equipment $ 36,000 Retained earnings 2,250 Total $ 17,250 Total assets $ 49,150 Total liabilities and owners’ equity $ 49,150 Prepare a pro forma balance sheet, assuming an increase in sales of 13 percent, no new external debt or equity financing, and a constant payout ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Calculate the EFN. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter18: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 16P

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Consider the following income statement for the Heir Jordan Corporation:

HEIR JORDAN CORPORATION Income Statement
Sales			$	47,600
Costs				35,600

Taxable income			$	12,000
Taxes (25%)				3,000

Net income			$	9,000

Dividends	$	2,505
Addition to retained earnings		6,495

The balance sheet for the Heir Jordan Corporation follows.

HEIR JORDAN CORPORATION Balance Sheet
Assets		Liabilities and Owners’ Equity
Current assets			Current liabilities
Cash	$	2,050	Accounts payable	$	2,400
Accounts receivable		4,700	Notes payable		4,500

Inventory		6,400	Total	$	6,900

Total	$	13,150	Long-term debt	$	25,000

			Owners’ equity
Fixed assets			Common stock and paid-in surplus	$	15,000
Net plant and equipment	$	36,000	Retained earnings		2,250

			Total	$	17,250

Total assets	$	49,150	Total liabilities and owners’ equity	$	49,150

Prepare a pro forma balance sheet, assuming an increase in sales of 13 percent, no new external debt or equity financing, and a constant payout ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Calculate the EFN. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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