Basic Leonard Industries wishes to prepare a pro forma balance sheet for December 31, 2016. The firm expects 2016 sales to total $3,000,000. The following information has been gathered:
(1) A minimum cash balance of $50,000 is desired.
(2) Marketable securities are expected to remain unchanged.
(3) Accounts receivable represent 10% of sales.
(4) Inventories represent 12% of sales.
(5) A new machine costing $90,000 will be acquired during 2016. Total depreciation for the year will be $32,000.
(6) Accounts payable represent 14% of sales.
(7) Accruals, other current liabilities, long-term debt, and common stock are expected to remain unchanged.
(8) The firm’s net profit margin is 4%, and it expects to pay out $70,000 in cash dividends during 2016.
(9) The December 31, 2015, balance sheet follows.

a. Use the judgmental approach to prepare a pro forma balance sheet datedDecember 31, 2016, for Leonard Industries.
b. How much, if any, additional financing will Leonard Industries require in 2016? Discuss.
c. Could Leonard Industries adjust its planned 2016 dividend to avoid the situation described in part b? Explain how.

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Assets Cash Leonard Industries Balance Sheet December 31, 2015 Marketable securities Accounts receivable $ 45,000 15,000 255,000 Inventories 340,000 Total current assets $ 655,000 Net fixed assets 600,000 Total assets $ 1,255,000 Liabilities and stockholders' equity Accounts payable Accruals Other current liabilities Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total liabilities and stockholders' equity $ 395,000 60,000 30,000 $ 485,000 350,000 $ 835,000 200,000 220,000 $1,255,000