Consider the following simplified financial statements for the Fire Corporation
ID: 2821627 • Letter: C
Question
Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes):
Income Statement
Sales
$37970
Costs
$22134
Balance Sheet
Assets
$52354
Debt
$35504
Equity
?
The company has predicted a sales increase of 7 percent. It has predicted that every item on the balance sheet will increase by 7 percent as well.
How much dividends should be paid to reconcile the pro forma balance sheet?
(Omit the "$" sign and commas in your response. Enter your answer rounded to 2 decimal places. For example, $1,200.456 should be entered as 1200.46.)
Income Statement
Sales
$37970
Costs
$22134
Explanation / Answer
Total assets=debt+equity
Hence beginning equity=(52354-35504)=$16850
Ending equity would be=$16850*1.07=$18029.5
Ending equity=beginning equity+Net income-Dividends
18029.5=16850+$16944.52-Dividends
Dividends=16850+$16944.52-18029.5
which is equal to
=$15765.02
Sales(37970*1.07) $40627.9 Costs(22134*1.07) $23683.38 Net income $16944.52