A Firm Has Net Income of $32,000 on Sales of $190,000

question 20

Multiple Choice

A firm has net income of $32,000 on sales of $190,000. Sales are expected to increase by 6% next year and the dividend payout ratio is 35%. The firm uses the percentage of sales approach when compiling pro forma statements. What amount is expected to be added to retained earnings next year?

• A)$14,300
• B)$15,400
• C)$15,686
• D)$17,550
• E)$22,048

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Definitions:

Scientific Process

A methodical approach to inquiry that involves observing phenomena, formulating hypotheses, conducting experiments, and drawing conclusions based on evidence.

Observation

A method of data collection involving closely monitoring and recording behaviors, actions, or events as they occur naturally, without interference.

Theory Development

The process of constructing a coherent set of propositions or hypotheses to explain phenomena, often tested through scientific research.

Hypothesis Testing

A statistical method that is used in making statistical decisions using experimental data.