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2. Euro Designs, Inc., expects sales during 2016 to rise from the 2015 level of $3.5 million to $3.9 million. Because of a scheduled large
2. Euro Designs, Inc., expects sales during 2016 to rise from the 2015 level of $3.5 million to $3.9 million. Because of a scheduled large loan payment, the interest expense in 2016 is expected to drop to $325,000. The firm plans to increase its cash dividend payments during 2016 to $320,000. The company's year-end 2015 income statement follows. Euro Designs, Inc., Income Statement for the Year Ended December 31, 2015 3,500,000 S 1,925,000 s 1,575,000 s 420,000 s 1,155,000 S 400,000 S 755,000 $ 302,000 s 453,000 S 250,000 S 203,000 Sales revenue Less: Cost of goods sold Less: Operating expenses Less: Interest expense Less: Taxes (rate-40%) Less: Cash dividends Gross profits Operating profits Net profits before taxes Net profits after taxes To retained earnings Use the percent-of-sales method to prepare a 2016 pro forma income statement for Euro Designs, Inc. Euro Designs, Inc., Pro Forma Income Statement for the Year Ended December 31, 2016 Sales revenue Less: Cost of goods sold(55%) Gross profits Less: Operating expenses ( 1 296) Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Cash dividends To retained earnings
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