=+LG 5 ST4–3 Pro forma income statement Euro Designs Inc. expects sales during 2020 to rise from the 2019 level of $3.5 million to $3.9 million. Because of a scheduled large loan payment, the interest expense in 2020 is expected to drop to $325,000. The firm plans to increase its cash dividend payments during 2020 to $320,000. The company’s year-end 2019 income statement follows.

Euro Designs Inc. Income Statement for the Year Ended December 31, 2019 Sales revenue $3,500,000 Less: Cost of goods sold 1,925,000 Gross profits $1,575,000 Less: Operating expenses 420,000 Operating profits $1,155,000 Less: Interest expense 400,000 Net profits before taxes $ 755,000 Less: Taxes (rate = 21%) 158,550 Net profits after taxes $ 596,450 Less: Cash dividends 250,000 To retained earnings $ 346,450