AMA International University BAHRAIN College of Administrative and Financial Sciences Bachelor of Science in Business Informatics 1 st Trimester, AY 2017-2018 Part 3 Arab United Company expects sales during 2013 to rise from the 2012 level of $3.5 million to $3.9 million. Because of a scheduled large loan payment, the interest expense in 2013 is expected to drop to $325,000. The firm plans to increase its cash dividend payments during 2013 to $320,000. The company's year-end 2012 income statement follows. Euro Designs, Inc. Income Statement for the Year Ended December 31, 2012 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 $3,500,000 1,925,000 $1,575,000 420,000 $1,155,000 400,000 S 755,000 302,000 S 453,000 250,000 s 203,000 a. prepare a 2013 pro forma income statement using the percent-of-sales method to b. Analyze the financial plan and explain why the statement may underestimate the company's actual 2013 pro forma income