what is the projected addition to retained earnings 556286

Calculating Retained Earnings from Pro Forma Income

Consider the following income statement for the Heir Jordan Corporation:

HEIR JORDAN CORPORATION

Income Statement

Sales

$24,000

Costs

13,500

Taxable income

$10,500

Taxes (34%)

3,570

Net income

$ 6,930

Dividends

$2,426

Addition to retained earnings

4,504

A20 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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