how did we get 96.8 as retained earnings? He 300...
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how did we get 96.8 as retained earnings?
He 300 subscription. the depreciation OT 20%. To dear with interest expense, we assume that it remains constant. This can be a good assumption when, let's say, the board of Li's corporation decided to raise new equity to finance the growth. All other accounts follow the same rules as we have discussed in class. (5 pts) Here is a general step for solving these types of questions. Making the pro forma income statement. The main purpose of this is to calculate the projected addition to retained earnings. Without otherwise stated, we simply assume that all accounts will go up by the same growth rate of sales as given in the question (except interest expense). That is, Original Income Statement Pro Forma Income Statement Sales: 1200 COGS: 650 Depreciation: 200 EBIT: 350 Interest Expense: 200 Taxable income: 150 Tax: 51 Net Income: 99 Dividends: 33 Addition to Retained Earnings: 66 Sales: 1440 COGS: 780 Depreciation: 240 EBIT: 420 Interest Expense: 200 Taxable income: 220 Tax: 74.8 Net Income: 145.2 Dividends: 48.4 Addition to Retained Earnings: 96.8 309
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