26.1 After examining patterns from recent years, management found the following regressionestimated relationships between some company balance sheets and income statement accounts and sales CA = 0.5 million + 0.25S FA = 1.0 million + 0.50S CL = 0.1 million + 0.10S NP = 0.0 million + 0.02S where CA = Current assets FA = Fixed assets CL = Current liabilities NP = Net profit after taxes S = Sales The company’s sales for last year were $10 million. The year-end balance sheet is reproduced below.

Management further found that the company’s sales bear a relationship to GNP. That relationship is

The forecast of GNP for next year is $2.05 trillion. The firm pays out 34 percent of net profits after taxes in dividends.
Create a pro forma balance sheet for this firm.

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Current assets Fixed assets $3,000,000 6,000,000 Current liabilities $1,100,000 Bonds 2,500,000 Common stock 2,000,000 Retained earnings 3,400,000 Total $9,000,000 Total $9,000,000