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Star Manufacturing estimates its sales in 2016 will be $3 million. Interest expense is expected to remain unchanged at $70,000, and the firm plans to
Star Manufacturing estimates its sales in 2016 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 2016. Use the percent-of-sales method to prepare a pro forma income statement for the year ended December 31, 2016, based on the 2015 income statement shown above.
The proforma operating profit amount is ________.
722,857
B
792,857
C
702,857
D
742,857
Star Manufacturing Company For the Year Ended December 31, 2015 Sales Less: Cost of goods sold Gross profits Less: Operating expenses Operating Profits Less: Interest expense Net profits before taxes Less: Taxes (40%) Net profits after taxes Less: Cash Dividends To: Retained earnings $2,800,000 1,820,000 $ 980,000 240,000 $ 740,000 70,000 $ 670,000 268,000 $ 402,000 132,000 $ 270,000Step by Step Solution
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