Question

22) Given the actual Income Statement for UMPI Inc. for 2019, the company anticipates sales growth...

22) Given the actual Income Statement for UMPI Inc. for 2019, the company anticipates sales growth of 3% in 2020 and 5% growth in sales for 2021. Prepare a pro forma income statement for 2020 & 2021. Note that depreciation & interest expense did not increase for 2020 & 2021. Also, the tax expense is calculated based on 30% of taxable income calculated on the pro forma income statement.

UMPI, Incorporated Income Statement

For the Period Ended December 31, 2019

Sales Revenue $280,000

COGS 140,000

SG&A 65,000

Depreciation 15,000

EBIT 60,000

Interest expense 10,000

Taxable Income 50,000

Tax rate 30%

Tax expense 15,000

Net Income $35,000

Homework Answers

Answer #1

Income statement for 2020 & 2021 is as follows:

UMPI, Incorporated Income Statement

For the Period Ended December 31, 2020 and 2021

2020($) 2021($)
Sale 288,400 294,000
($280,000*1.03) ($280,000*1.05)
Cost of goods sold 144,200 147,000
( $140,000*1.03) ($140,000*1.05)
SG&A 66,950 68,250
( $65,000*1.03) ($65,000*1.05)
Depreciation 15,000 15,000
EBIT 62,250 63,750
Interest expense 10,000 10,000
Taxable Income 52,250 53,750
Tax expense (30%) 15,675 16,125
Net Income $36.575 $37,625  
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