Income Statement

Huddleston Manufacturing Company

For the Year Ended December 31, 2012

Sales $2,800,000

Less: Cost of goods sold 1,820,000

Gross profits $ 980,000

Less: Operating expenses 240,000

Operating Profits $ 740,000

Less: Interest expense 70,000

Net profits before taxes $ 670,000

Less: Taxes (40%) 268,000

Net profits after taxes $ 402,000

Less: Cash Dividends 132,000

To: Retained earnings $ 270,000

Huddleston Manufacturing estimates its sales in 2013 will be $3 million. Interest expense is expected to remain unchanged at $70,000, and the firm plans to pay cash dividends of $140,000 during 2013. Cost of goods sold includes $200,000 in fixed costs, and operating expenses include $50,000 in fixed costs. Use the percentofsales method to prepare a pro forma income statement for the year ended December 31, 2013, based on the 2012 income statement shown above.