(1) The firm has estimated that its sales for 2020 will be $900,700. (2) The firm expects to pay $35,200 in cash dividends in 2020. (3) The firm wishes to maintain a minimum cash balance of $31.200. (4) Accounts receivable represent approximately 18% of annual sales. (5) The firm's ending inventory will change directly with changes in sales in 2020. (6) A new machine costing $43,800 will be purchased in 2020. Total depreciation for 2020 will be $16,300. (7) Accounts payable will change directly in response to changes in sales in 2020. (8) Taxes payable will equal one-fourth of the tax liability on the pro forma income statement. (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 judgmental approach. c. Analyze these statements, and discuss the resulting external financing required. Assets Cash Marketable securities Accounts receivable Inventories Total current assets Net fixed assets Leonard Industries Balance Sheet December 31, 2019 Liabilities and Stockholders' Equity Accounts payable 14,800 Accruals 255,300 Other current liabilities 339,800 Total current liabilities $654,500 Long-term debt 600,000 Common stock Retained earnings $1,254,500 Total liabilities and stockholders' equity $395,100 59,600 30,500 $485,200 349,400 200,300 219,600 $1,254,500 Total assets (1) The firm has estimated that its sales for 2020 will be $900,700. (2) The firm expects to pay $35,200 in cash dividends in 2020. (3) The firm wishes to maintain a minimum cash balance of $31.200. (4) Accounts receivable represent approximately 18% of annual sales. (5) The firm's ending inventory will change directly with changes in sales in 2020. (6) A new machine costing $43,800 will be purchased in 2020. Total depreciation for 2020 will be $16,300. (7) Accounts payable will change directly in response to changes in sales in 2020. (8) Taxes payable will equal one-fourth of the tax liability on the pro forma income statement. (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 judgmental approach. c. Analyze these statements, and discuss the resulting external financing required. Assets Cash Marketable securities Accounts receivable Inventories Total current assets Net fixed assets Leonard Industries Balance Sheet December 31, 2019 Liabilities and Stockholders' Equity Accounts payable 14,800 Accruals 255,300 Other current liabilities 339,800 Total current liabilities $654,500 Long-term debt 600,000 Common stock Retained earnings $1,254,500 Total liabilities and stockholders' equity $395,100 59,600 30,500 $485,200 349,400 200,300 219,600 $1,254,500 Total assets
