Principles of Managerial Finance Plus MyLab Finance with Pearson eText -- Access Card Package (15th Edition)
15th Edition
ISBN: 9780134830131
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 4, Problem 4.16P
Learning Goal 5
P4-16 Pro forma income statement The marketing department of Metroline Manufacturing estimates that its sales in 2020 will be 51.5 million. Interest expense is expected to remain unchanged at $35,000, and the firm plans to pay $70,000 in cash dividends during 2020. Metroline Manufacturing’s income statement for the year ended December 31, 2019, and a breakdown of the firm’s cost of goods sold and operating expenses into their fixed and variable components are given below.
- a. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2020.
- b. Use fixed and variable cost data to develop a pro forma income statement for the year ended December 31, 2020.
- c. Compare and contrast the statements developed in parts a and b. Which statement probably provides the better estimate of 2020 income? Explain why. Metroline Manufacturing Income Statement for the Year Ended December 31, 2019
Sales revenue | $1,400,000 |
Less: Cost of goods sold | 910,000 |
Gross profits | $ 490,000 |
Less: Operating expenses | 120,000 |
Operating profits | $ 370,000 |
Less: Interest expense | 35,000 |
Net profits before taxes | $ 335,000 |
Less: Taxes (rate = 40%) | 134,000 |
Net profits after taxes | $ 201,000 |
Less: Cash dividends | 66,000 |
To |
$135,000 |
Metroline Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended
December 31, 2019
Cost of goods sold | |
Fixed cost | $210,000 |
Variable cost | 700,000 |
Total costs | $910,000 |
Operating expenses | |
Fixed expenses | $36,000 |
Variable expenses | 84,000 |
Total expenses | $120,000 |
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Chapter 4 Solutions
Principles of Managerial Finance Plus MyLab Finance with Pearson eText -- Access Card Package (15th Edition)
Ch. 4.1 - Prob. 4.1RQCh. 4.1 - Prob. 4.2RQCh. 4.2 - Briefly describe the first four modified...Ch. 4.2 - Describe the overall cash flow through the firm in...Ch. 4.2 - Prob. 4.5RQCh. 4.2 - 4-B Why is depreciation (as well as amortization...Ch. 4.2 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Learning Goal 5 E4-5 Rimier Corp. forecasts sales...Ch. 4 - Prob. 4.1PCh. 4 - Learning Goal 2 P4-2 Depreciation In early 2019,...Ch. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.11PCh. 4 - Learning Goal 4 P4-12 Cash budget: Advanced The...Ch. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Learning Goal 5 P4-16 Pro forma income statement...Ch. 4 - Learning Goal 5 P4-17 Pro forma income statement:...Ch. 4 - Learning Goal 5 P4-18 Pro forma balance sheet:...Ch. 4 - Learning Goal 5 P4-19 Pro forma balance sheet...Ch. 4 - Learning Goal 5 P4-20 Integrative: Pro forma...Ch. 4 - Learning Goal 5 P4-21 Integrative: Pro forma...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 1SE
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