Pro-forma Homework Handout
Spring 2013
Allen Products, Inc. wants to project their earnings and income for 2012. Allen’s income statement for the most recent year follows: Allen Products Inc. Income Statement | For the Year Ended December 31, 2011 | Sales Revenue | $97,500 | Less: Cost of Goods Sold | 41,875 | Gross Profits (Margin) | $55,625 | Less: Operating Expenses | 24,375 | Operating Profits (Margin) (EBIT) | $31,250 | Less: Interest Expense | 3,000 | Net profits before tax (EBT) | $28,250 | Less: Taxes (rate = 35%) | 9,888 | Net Profits after taxes (EAT, net income, net margin) | $18,362 |

Use the percent of sales method, the income statement for December 31, 2011, and the sales revenue estimate of $107,250 to develop a pro forma income statement for the coming year. Allen Products plans to pay a 50% dividend in 2012.

Allen Products Inc. Income Statement | 2012 | Sales Revenue | $107,250 | Less: Cost of Goods Sold | 46,062.5 | Gross Profits (Margin) | 61,187.5 | Less: Operating Expenses | 26,812.5 | Operating Profits (Margin) (EBIT) | 34,375 | Less: Interest Expense | 3000 | Net profits before tax (EBT) | 31,375 | Less: Taxes (rate = 35%) | 10,981.25 | Net Profits after taxes (EAT, net income, net margin) | 20,393.75 | Dividends | 10,196.875 | To Retained Earnings | 10,196.875 |

* Allen Products has the following balance sheet for December 31, 2011: Current assets | $ 5,000 | Accounts payable | $ 1,000 | Net fixed assets | 10,000 | Accruals | 1,000 | | | Long-term debt | 5,000 | | | Common equity | 6,000 | | | Retained Earnings | 2,000 | Total assets | $15,000 | Total | $15,000 | Fixed and current assets are fully utilized,