2) In July 1960 the food wholesale firm of Hepplefinger & Company was expecting another problematic year of operations. For purposes of planning the firm's funds needs and to obtain a picture of the future financial condition, the secretary-treasurer was asked to prepare a pro forma balance sheet as of June 30, 1961. The balance sheet as of June 30, 1960, appears below. Hepplefinger & Company had a policy of maintaining a cash balance of at least $40,000. Acquisitions planned for the year were building improvements of $10,000, and the purchase of a delivery truck, $4,000. Net sales for the ensuing year were forecast at $2,650,000 with a gross margin of 8%. Purchases of merchandise were expected to total $2,475,000. The collection period was expected to be 14 days, and accounts payable outstanding would be 25 days. Profits for the period were budgeted at .4% of sales before taxes, and .2% after taxes. Dividends of $2,500 would be paid during the year. Mortgage payments were $1,500 per year, while the bank loan fluctuated with inventory as needed. Depreciation was expected to be $8,300 for the coming year. Hepplefinger & Company-Balance Sheet, June 30, 1960 Cash Accounts receivable Inventories Total current assets Land, buildings, equipment, trucks Accumulated depreciation Net fixed assets Other assets Total assets $ 54,600 87,200 221,900 $363,700 $111,400 73,700 $ 37,700 5,100 $406,500 Accounts payable Notes payable-bank (secured by inventory) Accrued expenses and taxes Total current liabilities Mortgage payable-real estate Capital stock Earned surplus Total liabilities and net worth $150,900 120,000 11,300 $282,200 24,000 75,000 25,300 $406,500