Income Statement Ace Manufacturing, Inc. For the Year Ended December 31, 2017

:

Ace Manufacturing, Inc., is preparing pro forma financial statements for 2018. The firm utilized the percent-of-sales method to estimate costs for the next year. Sales in 2017 were $2 million and are expected to increase to $2.4 million in 2018. The firm has a 40 percent tax rate. (Income Statements must be in good form).

(a) Given the 2017 income statement and the stated assumptions, above, if depreciation and interest are not expected to change, calculate the estimated net income and the amount by which retained earnings will increase for 2018 (Show all calculations).