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Pro Forma Income Statements Presented below is the consolidated statement of earnings for Mann & Miller, Inc. Mann & Miller, Inc. Consolidated Statement of Earnings
Pro Forma Income Statements
Presented below is the consolidated statement of earnings for Mann & Miller, Inc.
Mann & Miller, Inc. | ||||
---|---|---|---|---|
Consolidated Statement of Earnings | ||||
($ millions) | 2015 | 2014 | 2013 | |
Sales of customers | $36,298 | $32,317 | $29,172 | |
Cost of goods sold | 10,447 | 9,581 | 8,957 | |
Gross profit | 25,851 | 22,736 | 20,215 | |
Selling, marketing & administrative expense | 12,216 | 11,260 | 10,495 | |
Research expense | 3,957 | 3,591 | 3,105 | |
Purchased in-process research & development | 189 | 105 | 66 | |
Interest income | (256) | (456) | (429) | |
Interest expense, net of portion capitalized | 160 | 153 | 204 | |
Other (income) expense, net | 294 | 185 | (94) | |
16,560 | 14,838 | 13,347 | ||
Earnings before provision for income taxes | 9,291 | 7,898 | 6,868 | |
Provision for income taxes | 2,694 | 2,230 | 1,915 | |
Net earnings | $ 6,597 | $ 5,668 | $ 4,953 | |
Basic net earnings per share | $2.20 | $1.87 | $1.65 | |
Diluted net earnings per share | $2.16 | $1.84 | $1.61 |
Required Using the Mann & Miller Inc. (M&M) consolidated statement of earnings as your base year, prepare pro forma income statements for M&M for 2016 and 2017. Relevant assumptions that you should use include:
- Sales growth is 10 percent per year.
- Gross profit margin is 65 percent.
- Effective income tax rate is 29 percent.
- Selling, marketing & administrative expenses, research expenses, and other income and expenses net all vary as a function of sales.
- Purchased in-process R&D, and interest income remain constant at the 2015 level.
- Interest expense is six percent of the beginning balance of long-term debt.
- Long-term debt at the end of 2015 is $2,750 and increases by five percent each year.
Instructions
Mann & Miller, Inc. | |||
---|---|---|---|
Proforma Financial Statements | |||
(in millions) | 2016 | 2017 | |
Sales to customers | |||
Cost of sales | |||
Gross profit | |||
Selling & administrative | |||
Research | |||
In-process R & D | |||
Interest income | |||
Interest expense | |||
Other (income) expense, net | |||
Income before taxes | |||
Income taxes | |||
Netincome |
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- Round answers to the nearest whole number.
- Use rounded Sales figure for subsequent calculations.
- For selling, marketing & administrative expenses, research expenses, and other income and expenses computations - use (2015 expense / 2015 sales) as your factor for both 2016 and 2017 computations. Do not round until your final answer.
- Use a negative sign with interest income answers.
Mann & Miller, Inc. | |||
---|---|---|---|
Proforma Financial Statements | |||
(in millions) | 2016 | 2017 | |
Sales to customers | |||
Cost of sales | |||
Gross profit | |||
Selling & administrative | |||
Research | |||
In-process R & D | |||
Interest income | |||
Interest expense | |||
Other (income) expense, net | |||
Income before taxes | |||
Income taxes | |||
Netincome |
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