A Company Had Net Income of $4,500 Last Year on Sales

question 43

Multiple Choice

A company had net income of $4,500 last year on sales of $53,000. Sales are expected to increase by 11% next year and the dividend payout ratio is 40%. This firm uses the percentage of sales approach when compiling pro forma statements. What amount will expect to be added to retained earnings next year?

• A) $1,937
• B) $1,609
• C) $2,255
• D) $3,098
• E) $2,997

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Definitions:

Common Stock Subscribed

A commitment by investors to purchase shares of a company's common stock, where the shares are reserved for the subscribers until payment is made.

Dividends in Arrears

Dividends on preferred shares that have not been paid in the scheduled time, accruing until they are paid out.

Footnotes

Additional information provided at the bottom of financial statements to offer more details about an entity's financial status or policies.