Amounts are in thousands of dollars (except number of shares and price per share
ID: 2651128 • Letter: A
Question
Amounts are in thousands of dollars (except number of shares and price per share):
Kiwi Fruit Company Balance Sheet
Cash and equivalents $ 570
Operating assets 650
Property, plant, and equipment 2,700
Other assets 110
Total assets $ 4,030
Current liabilities $ 920
Long-term debt 1,280
Other liabilities 120
Total liabilities $ 2,320
Paid in capital $ 340
Retained earnings 1,370
Total equity $ 1,710
Total liabilities and equity $ 4,030
Kiwi Fruit Company Income Statement
Net sales $ 7,800
Cost of goods sold (5,900 )
Gross profit $ 1,900
Operating expense (990 )
Operating income $ 910
Other income 105
Net interest expense (200 )
Pretax income $ 815
Income tax (285 )
Net income $ 530
Earnings per share $ 2.00
Shares outstanding 265,000
Recent price $ 34.50
Kiwi Fruit Company Cash Flow Statement
Net income $ 530
Depreciation and amortization 175
Changes in operating assets (90 )
Changes in current liabilities (120 )
Operating cash flow $ 495
Net additions to properties $ 180
Changes in other assets (80 )
Investing cash flow $ 100
Issuance/redemption of long-term debt $ (190 )
Dividends paid (220 )
Financing cash flow $ (410 )
Net cash increase $ 95
Prepare a pro forma income statement, balance sheet, and cash flow statement for Kiwi Fruit assuming a 10 percent increase in sales. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Input all amounts as thousands of dollars. Round earnings per share to 2 decimal places. Omit the "$" sign in your response.)
Kiwi Fruit Company Pro Forma Income Statement
Net sales $
Cost of goods sold
Gross profit $
Operating expense
Operating income $
Other income
Net interest expense
Pretax income $
Income tax
Net income $
Earnings per share $
Shares outstanding
Kiwi Fruit Company Pro Forma Cash Flow Statement
Net income $
Depreciation and amortization
Changes in operating assets
Changes in current liabilities
Operating cash flow $
Net additions to property $
Changes in other assets
Investing cash flow $
Issuance/redemption of long-term debt $
Dividends paid
Financing cash flow $
Net cash increase $
Kiwi Fruit Company Pro Forma Balance Sheet
Cash and equivalents $
Operating assets
Property, plant, and equipment
Other assets
Total assets $
Current liabilities $
Long-term debt
Other liabilities
Total liabilities $
Paid in capital $
Retained earnings
Total equity $
Total liabilities and equity $
Explanation / Answer
With a 10% sales increase, sales will rise to $8580. the pro forma income statement
follows. A constant gross margin is assumed, implying that Cost of Goods Sold will also
decrease by 10%. A constant tax rate is used. Items in italics are carried over unchanged.
Kiwi Fruit Company Pro Forma Income Statement
Net sales 8580
Cost of goods sold (6490)
Gross profit 2090
Operating expense (990)
Operating income 1100
Other income 105
Net interest expense (200)
Pretax income 1005
Income tax 351
Net income 654
Earnings per share 2.46
Shares outstanding 265000
Next, we prepare the cash flow statement. Notice that we pick up the $491 net income from
the pro forma income statement. Items in italics are carried over unchanged. By assumption,
no investments occur, and no long-term debt is issued or redeemed.
Kiwi Fruit Company Pro Forma Cash Flow Statement
Net income 654
Dep and amort. 175
Chg. in operating assets (90)
Chg. In current liabilities (120)
Operating cash flow 619
Net additions to property
Changes in other assets -
Investing cash flow
Issue/Redeem LTD - -
Dividends paid (220)
Financing cash flow (220)
Net cash increase 399
Finally, we have the balance sheet. Cash rises by the $399 Net cash flow from the cash flow
statement. The $90 increase in Operating Assets and the $120 decrease in Current
Liabilities are also from the cash flow statement. The $ 175 reduction in Property, Plant, and Equipment is the amount of the depreciation deduction shown on the cash flow statement.
The increase in retained earnings is equal to pro forma Net Income less pro forma
Dividends.
Kiwi Fruit Company Pro Forma 2001 Balance Sheet
Cash and equiv. 969
Operating assets 740
PP & E 2525
Other assets 110
Total assets 4344
Current liabilities 800
Long-term debt 1280
Other liabilities 120
Total liabilities 2200
Paid in capital 340
Retained earnings 1804
Total equity 2144
Total L&E 4344
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