P4–17 Pro forma income statement Bells Manufacturing estimates that the sales for the 2023 financial year will be $2.25

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P4 17 Pro Forma Income Statement Bells Manufacturing Estimates That The Sales For The 2023 Financial Year Will Be 2 25 1 (345.36 KiB) Viewed 48 times

P4–17 Pro forma income statement Bells Manufacturing estimates that the sales for the 2023 financial year will be $2.25 million. No new borrowing was obtained and, therefore, the interest expense remained unchanged at $24,500. Bells Manufacturing is planning on paying cash dividends of $85,000 during 2023. Refer to the financial data for the year ended December 31, 2022, while answering the following: a. Compile the pro forma income statement for the year ended December 31, 2023, using the percentage-of-sales method. b. Compile the pro forma income statement for the year ended December 31, 2023, using the fixed and variable cost data. c. As the financial manager, which of the two pro forma statements would you regard as more accurate? Explain. Bells Manufacturing Income Statement for the Year Ended December 31, 2022 Bell Manufacturing Breakdown of Costs and Expenses into Fixed and Variable Components for the Year Ended December 31, 2022 Cost of goods sold Fixed cost Variable cost $ 750,000 350,000 $1,100,000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Cash dividends To retained earnings $1,800,000 1,100,000 $ 700,000 450,000 $ 250,000 24,500 $ 225,500 90,200 $ 135,000 85,000 $ 50,300 Total costs Operating expenses Fixed expenses Variable expenses Total expenses $155,000 295,000 $450,000