Last year, a firm had net income of $508,000 on sales of $1,250,000. The projected sales for next year are $1,450,000. Assume the firm uses the percentage of sales method for pro forma statements. What is the projected net income?
A)$589,280
B)$599,390
C)$639,200
D)$650,500
E)$701,900

Question

Quizplus · Accepted Answer

The net income is projected using the percentage of sales method. The net income margin from last year is calculated as $508,000 / $1,250,000 = 0.4064 or 40.64%. Applying this percentage to the projected sales of $1,450,000 gives a projected net income of 0.4064 * $1,450,000 = $589,280.

Last Year, a Firm Had Net Income of $508,000 on Sales