A Firm Has Net Income of $20,000 on Sales of $208,000

question 14

Multiple Choice

A firm has net income of $20,000 on sales of $208,000. Sales are expected to increase by 10 percent next year and the dividend payout ratio is 35 percent. 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) $22,000
• E) $26,600

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