Evaluate the financial statements of the company Pure Nature. Use the financial

Question

Evaluate the financial statements of the company Pure Nature.

Use the financial information of these states and further provided herein to prepare the

financial plan of the company for the year 20X7.

Consider the following data:

1) To. It is estimated that sales for 20X7 will be $ 6,000,000.

2) The cost of goods sold (COGS) in 20X6 includes $ 1,000,000 in fixed costs.

3) Operating expenses in the 20X6 include $ 250,000 in fixed costs.

4) Interest expense (interest expense) will remain unchanged.

5) Based on 40% of profits after tax dividends (net be paid

profits after taxes)

6) Cash (cash) and inventories (inventories) will double.

7) The marketable securities, notes payable, long-term debt and common stock,

they remain the same.

8) The accounts receivable, accounts payable and other current liabilities will change

directly related to the change in sales.

9) A new computer system worth $ 356,000 will be purchased during the year.

10) Depreciation expense for the year is $ 110,000.

11) The tax rate remains at 40%.

Instructions:

1. Prepare a statement of income and expenses pro fit for the year ending 20x7

using the method of percentage of sales.

2. Prepare a balance sheet pro forma as of 31 December 20X7 using the method

Administrative assumptions (judgmental approach).

3. Analyze the use of pro forma statements. Why they are performed? What is the role?

4. Analyzes states and discusses whether or not you need an external financing (external

financing). Give reasons for your answer.

*** IT IS VERY IMPORTAR TO COMPLETE THE ENTIRE EXERSICE ** INCLUDE ALL THE CALCULATIONS, THANK

Explanation / Answer

Answer: Income Statement:

Answer:2 Balance sheet:

Income Statement Particulars Amount ($) Sales 6000000 Less: COGS 3100000 Gross Profit 2900000 Less: Operating expenses 970000 Net profit before interest & taxes 1930000 Less: Interest expenses 200000 Less: Depreciation expense 110000 Net profit before taxes 1620000 Less: Taxes @40% 648000 Net Profit after taxes 972000 Less: Cash Dividend 388800 To retained earnings 583200

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