Statement of Cash Flow Create pro forma financial statements from the informatio

Question

Statement of Cash Flow

Create pro forma financial statements from the information provided below Year 1 Sales revenues increase 3.0% Gross margin is 47% SG&A decreases by 3.0% $2000 of PP&E is purchased on January 1, New PP&E is depreciated over 10 years Inventory grows in line with COGS Assume that all other asset accounts grow in line with sales (3.0%). Accounts Payable grow in line with COGS Accrued and deferred income taxes grows in line with tax expense. Long-term debt increases by $500 Unless otherwise stated, liability accounts grow in line with sales (3.0%) Treasury Stock purchases equal $200 Average interest cost of all interest bearing debt is 1.6% Dividend payout ratio is 25% Tax rate is 35% Funding requirements should be financed with short-term debt Y2 Sales revenue decline by 2.0% Gross margin increases to 50% Inventory grows in line with COGS SG&A increases by 2% $500 of PP&E is sold on January 1 for $500 cash. (Gross =$800, Accumulated depreciation = $300) Annual depreciation expense declines by $ 50 Assume that all other asset accounts grow in line with sales. (-2.0%) Accounts Payable grow in line with COGS Long-term debt declines by $150 Accrued and deferred income taxes grows in line with tax expense. Unless otherwise stated, liability accounts grow in line with sales (-2.0%) Treasury Stock purchase is $250. Average interest cost of all interest bearing debt is 1.8% Dividend payout ratio changes to 28% Tax rate is 35% Funding requirements should be financed with short-term debt Excess cash is used to retire short-term debt 100 shares of $1 par value common stock is issued for $400. Do not add significant amounts to cash unless Loans & notes payable is drawn down to zero. 1 Pro-forma financial statements Year 1 10000% Dvidends 20 Balance Sheet expen & other Year 1 ued 47 Shareholders' Equity 8.052

Explanation / Answer

Revenues 17,000 17510 Cost of Goods Sold 9,200 9280 Gross Profit 7,800 8230 SG&A 4,790 4646 Depreciation 1,700 1900 Operating Profit 1,310 1683 Interest Expense 155 69 Incomes Before Taxes 1,155 1614 Taxes @35% 404 565 Net Income 751 1049 Dividends 225 262 Additional Retaines earnings 526 787 Cash and Cash Equivalents 640 659 Markateble Securities 28 29 Accounts Receivables 8,200 8446 Inventory 3,142 3169 Prepaid Espense and other Assets 1,323 1363 Total Current Assets 13,333 13666 Plant Property and equipment (gross) 7,607 9607 Accumulated Depreciation 3,000 4900 PP&E (net) 4,607 4707 Total Assets 17,940 18373 Liabiilties & Shareholders' Equity Year 0 Year 1 Accounts payable 3,148 3175 Loans and notes payable (plug) 2,423 1038 accured incoems taxes 1,322 1849 Total Current Liabilities 6,893 6062 Long term debt 2,800 3300 defferd incomes taxes 195 273 Shared holders' Equity Common Stock at par 860 860 Capital Surplus 863 863 Retaines earnings 6429 7216 Less Treasury Stock -100 200 Total Equity 8,052 8739 Total Liabiities and Shareholder Equity 17,940 18373

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