Pro Forma Statements Problem A) 1. Income Statement Balance Sheet Year Ended 201
ID: 2402774 • Letter: P
Question
Pro Forma Statements Problem
A) 1. Income Statement Balance Sheet
Year Ended 2017 12/31/17
Sales $27,000 Cash $ 500
Cost of Goods Sold 18,900 Accounts Receivable 4,500
Gross Profit 8,100 Inventory 3,150
Expenses 6,000 Gross Fixed Assets 54,000
Earnings Before Tax 2,100 Accumulated Depreciation 21,600
Tax (.5) 1,050 Net Fixed Assets 32,400
Net Income $ 1,050 Total Assets $40,550
Accounts Payable $ 1,575
Notes Payable 19,175
Accrued Tax 263
Common Stock 15,787
Retained Earnings 3,750
Total Debt & Equity $40,550
A. Based on the 2017 Financial Statements above, compute Pro Forma’s for 2018 under the percent of sales approach using the following assumptions:
- Straight- line depreciation over 10 year life, all assets same age, and
- ‘No Growth’ no inflation (i.e., everything ceteris paribus).
B. Based on the 2017 Financial Statements above, compute Pro Forma’s for 2018 using the percent of sales method using the following assumptions:
- 20% growth rate in sales, and
- 15% dividend payout
Pro Forma Statements Problem Income Statement Year Ended 2017 Balance Sheet 12/31/17 1. $ 500 4,500 ? 150 Sales Cost of Goods Sold Gross Profit Expenses Earnings Before Tax Tax (5) Net Income $27,000 18,900 8,100 6.000 2,100 1050 S L050 Cash Accounts Receivable Inventory Gross Fixed Assets Accumulated Depreciation21.600 Net Fixed Assets Total Assets 54,000 32 400 $40.550 Accounts Payable Notes Payable Accrued Tax Common Stock Retained Earnings Total Debt & Equity S 1,575 19,175 263 15,787 3.750 $40,550Explanation / Answer
A $ Gross Fixed Asset 54,000 Life of assets = 10 years Annual Depreciation ( $ 54,000 /10) 5,400 1. Income statement Year Ended 2018 $ Sales 27,000 Less: Cost of goods sold (18,900) Gross Profit 8,100 Depreciation (5,400) Other Expenses ( $ 6,000 - $ 5,400) (600) Earning Before Tax 2,100 Less: Tax (.5) (1,050) Net Income 1,050 2. Balance sheet 12/31/2018 $ Cash ( $ 500 + $ 27,000 - $ 18,900 - $ 600 - $ 263) 7,737 Accounts Receivable 4,500 Inventory 3,150 Gross Fixed Assets $ 54,000 Accumulated Depreciation($ 21,600 + $ 5,400) $ 27,000 Net Fixed Asset 27,000 Total Assets 42,387 Accounts Payable 1,575 Notes Payable 19,175 Accrued Tax 1,050 Common Stock 15,787 Retained Earnings ( $ 3,750 + $ 1,050) 4,800 Total Debt & Equity 42,387 Note: 1. Assume all sales are cash sales 2. No effect of Accounts receivable and payable 3. Maintained same level of ending inventory 4. all Purchases are cash purchases 5. Beginning accrued taxes are paid during the year B 1. Income statement Year Ended 2018 $ Sales ( $ 27,000 x 1.2) 32,400 Less: Cost of goods sold ( $ 18,900 x 1.2 ) (22,680) Gross Profit 9,720 Expenses ( $ 5,400 + 600) (6,000) Earning Before Tax 3,720 Less: Tax (.5) (1,860) Net Income 1,860 Dividend payout = $ 1,860 x 15% = $ 279 2. Balance sheet 12/31/2018 $ Cash ( $ 500 + $ 32,400 - $ 22,680 - $ 600 - $ 263 - $ 279) 9,078 Accounts Receivable 4,500 Inventory 3,150 Gross Fixed Assets $ 54,000 Accumulated Depreciation($ 21,600 + $ 5,400) $ 27,000 Net Fixed Asset 27,000 Total Assets 43,728 Accounts Payable 1,575 Notes Payable 19,175 Accrued Tax 1,860 Common Stock 15,787 Retained Earnings ( $ 3,750 + $ 1,860- $ 279) 5,331 Total Debt & Equity 43,728 Note: 1. Assume all sales are cash sales 2. Equal growth in cost of goods sold 3. No effect of Accounts receivable and payable 4. Maintained same level of ending inventory 5. all Purchases are cash purchases 6. Beginning accrued taxes are paid during the year 7. Dividend paid by cash
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.