Problem:

Radical Designs Inc. hopes to create a proforma income statement with select information gathered. Used the percent$-$of$-$sales method to prepare a $2019$ pro forma income statement.

Assumption$($s$)$

Sales are expected to rise from the $2018$ level of $$3,750,000$ to $$4,550,000$

The interest expense in $2019$ is expected to drop to $$345,000$

The firm plans to increase its cash dividend payments during $2019$ to $$335,000$

Tax Rate $41\%$

Radical Designs Inc.

Income Statement

For the year ended December $31,2018$

Sales Revenue $$3,750,000$

Less: Cost of goods sold $1,925,000$

Gross profits $$1,575,000\mathrm{.}00$

Less: Operating expenses $420,000$

Operating profits $$1,155,000$

Less: Interest expense $400,000$

Net profits before taxes $$755,000$

Less: Taxes $302,000$

Net profits after taxes $$453,000$

Less: Cash dividends $250,000$

To retained earnings $203,000$

Excel solution method: create proforma income statement