=+P4–21 Integrative: Pro forma statements Morten Metal Limited has assembled past (2019)

financial statements (income statement and balance sheet follows) and financial projections for use in preparing financial plans for the coming year (2020)

Information related to financial projections for the year 2020 follows.
(1) Projected sales are $420,000.
(2) Cost of goods sold in 2019 includes $72,000 in fixed costs.
(3) Operating expense in 2019 includes $17,500 in fixed costs.
(4) Interest expense will be $18,000 in 2020.
(5) The firm will pay cash dividend amounting to 25% of net profit after taxes.
(6) Cash and inventories are expected to double.
(7) Marketable securities, long-term debt, and common stock will remain unchanged.
(8) Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales.
(9) During the year, the firm will purchase a delivery vehicle costing $25,000. The depreciation expense on the new vehicle for 2020 will be $7,000.
(10) The tax rate will remain at 25%.