Question 2 Esther egg farm is contructing its pro forma financial statements for

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Question 2

Esther egg farm is contructing its pro forma financial statements for this year. At year end, assest were 400,000 and accounts payable(the only curren liabilities account) were 125,000 last year sales were 500,000. esther expects to grow by 15% this year. assests and account payables are expected to grow proportionally sales. common stock currently equals 140,000 and reained earnings aare 98,000. esther plans to sell 15000 of new common stock this year. the firm profit mergin on sales is 6% and 40& of earnings will be paid out as divideneds how much new long term debt financining will esther need this year to finance it expected growth?

Explanation / Answer

Esther Egg Farm Last Year Amt $ % Sales          500,000 100% Asset          400,000 80% Liabilities & Equities Accounts Payable          125,000 25% Common Stock          140,000 28% Retained earning            98,000 20% Long term Debt            37,000 Balancing figure Total liabilities & Equities          400,000 Proforma Financial statement Current Year Amt $ % Sales          575,000 Net Profit@6%            34,500 Dividend payout@40%            13,800 Transfer to retained earning            20,700 Proforma Balance Sheet Assets          460,000 % sales Liabilities & Equities Accounts Payable          143,750 % sales Common Stock          155,000 new issue of share 15,000 Retained earning          118,700 Addtion of 20700 Long term Debt            42,550 Balancing figure Total liabilities & Equities          460,000 So new Long term debt required $    5,550.00

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