Income Statement

12/31/2015

Sales

$1,600,000

Cost of goods sold

1,040,000

Gross profit

$560,000

Operating costs

192,000

Depreciation expense

42,000

Net operating profit

$326,000

Interest expense

11,000

Earnings before taxes

$315,000

Taxes

88,200

Net income

$226,800

Dividends

$28,000

Addition to retained earnings

$198,800

(Forecasting net income) In November of each year, the CFO of Barker Electronics begins the financial forecasting process to determine the firm's projected needs for new financing during the coming year. Barker is a small electronics manufacturing company located in Moline, Illinois, which is best known as the home of the John Deere Company. The CFO begins the process with the most recent year's income statement, projects sales growth for the coming year, and then estimates net income and finally the additional earnings he can expect to retain and reinvest in the firm. The firm's income statement for 2015 follows: The electronics business has been growing rapidly over the past 18 months as the economy recovers, and the CFO estimates that sales will expand by 16 percent in the next year. In addition, he estimates the following relationships between each of the income statement expense items and sales: Note that for the coming year both depreciation expense and interest expense are projected to remain the same as in 2015. a. Estimate Barker's net income for 2016 and its addition to retained earnings under the assumption that the firm leaves its dividends paid at the 2015 level. b. Reevaluate Barker's net income and addition to retained earnings if sales grow at 32 percent over the coming year. However, this scenario requires the addition of new plant and equipment in the amount of $100,000, which increases annual depreciation to $49,000 per year, and interest expense rises to $16,000. X a. What is the estimate of Barker's net income for 2016? (Round to the nearest dollar.) Help me solve this Data table COGS/sales Operating expenses/sales Depreciation expense Interest expense $ 42,000 $ 11,000 28% Tax rate (Click on the icon located on the top-right corner of the data table above in order to copy its contents into a spreadsheet.) View an example Get more help. A Print 65% 12% Done Data table Income Statement Sales Cost of goods sold Gross profit Operating costs Depreciation expense Net operating profit Interest expense Earnings before taxes Taxes Net income Dividends Addition to retained earnings 12/31/2015 $ 1,600,000 1,040,000 $ $ $ $ $ $ 560,000 192,000 42,000 326,000 11,000 315,000 88,200 226,800 28,000 198,800 eck