Integrative Pro forma statements Red Queen Restaurants wishes to prepare financi

Question

Integrative Pro forma statements Red Queen Restaurants wishes to prepare financiall plans. Use the finacial statements and the other information provided here E (1) The firm has estimated that its sales for 2020 will be $900,400 (2) The firm expects to pay $34,900 in cash dividends in 2020. (3) The firm wishes to maintain a minimum cash balance of $30,600 (4) Accounts receivable represent approximately 21% of annual sales (5) The firm's ending inventory will change directly with changes in sales in 2020 (6) A new machine costing $44,000 will be purchased in 2020. Total depreciation for 2020 will be $15,300 (7) Accounts payable will change directly in response to changes in sales in 2020 (8) Taxes payable will equal one-lourth of the tax liability on the pro forma income staternent. (9 Marketable securities, other current liabilities, long-term debt, and common stock will remain unchanged a. Prepare a pro forma income statement for the year ended December 31, 2020, using the percent-of sales method b. Prepare a pro forma balance sheet dated December 31, 2020, using the udgmental approsch. c. Analyze these statements, and discuss the resulting external financing required to prepare the financiall plans. The following financial data are also available.

Explanation / Answer

Sales 900400 (given in the question) Cost of Goods Sold 674063 (% of previous year, +599200/800400) Gross Profits 226337 Less Operating Expenses 113619 (% of previous year, +101000/800400) Net profit Before Taxes 112719 Taxes (21%) 23671 Net profit after taxes 89048 Less Cash Dividends 34900 given in the question To Retained Earnings 54148 Cash 30600 given in the question Marketable Securities 17500 Accounts Receivable 189084 (21% of sales) Inventories 113394 Change as per sales hence 100,800 for 800400 then for 900400) Total Current Assets 350578 Net Fixed Assets 379000 (A machinery is added 44000 less 15300) Total Assets 729578 Accounts Payable 111369 Changes based on sales Taxes Payable 5918 1/4 th of tax libilities Other Current Liablities 5000 Unchanged Total Current Liabilities 122287 Long-term Debt 199900 Unchanged Common stock 150500 Unchanged Retained Earning 229148 Previous year + from pro forma statement External Funds Required 27743 Balancing Figure Total Liabilities + Equity 729578

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