31. Preparing pro forma financial statements (requires Appendix 7.1). Problem 25 presents financial statements for Bullseye Corporation for its fiscal years ending December 31, 2011, 2012, and 2013, as well as financial statement ratios. a. Prepare a set of pro forma financial statements for Bullseye Corporation for fiscal years 2014 through 2018 using the assumptions detailed below. b. Describe actions that Bullseye might take to deal with the shortage of cash projected in part a. c. What are the likely reasons for the projected changes in the return on equity? EXHIBIT 7.16 Bullseye Corporation Comparative Income Statement (amounts in millions of US$) (Problem 25) For the Year Ended December 31 2013 2012 2011 $61,471 $57,878 $51,271 1,918 1,637 1,376 63,389 59,515 52,647 Sales Revenue Other Revenues. Total Revenues Less Expenses: Cost of Goods Sold Selling and Administrative. Interest ... Total... Income Before Income Taxes. Income Tax Expense Net Income Cengage Learning 2014 41,895 16,200 669 58,764 4,625 1,776 $ 2,849 39,399 15,022 597 55,018 4,497 1,710 $ 2,787 34,927 13,370 490 48,787 3,860 1,452 $ 2,408 EXHIBIT 7.17 Bullseye Corporation Comparative Balance Sheet (amounts in millions of US$) (Problem 25) December 31 2012 2011 2013 2010 ASSETS Cash.... Accounts Receivable (net) Inventories Prepayments Total Current Assets. Property, Plant, and Equipment (net). Other Noncurrent Assets... Total Assets... $ 2,450 8,054 6,780 1,622 $18,906 25,908 1,559 $46,373 $ 813 6,194 6,254 1,445 $14,706 22,681 1,212 $38,599 $ 1,648 5,666 5,838 1,253 $14,405 20,501 1,552 $36,458 $ 2,245 5,069 5,384 1,224 $13,922 18,042 1,511 $33,475 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts Payable .... Current Portion of Long-Term Debt. Other Current Liabilities. .. Total Current Liabilities Long-Term Debt .... Other Noncurrent Liabilities Total Liabilities. .... Common Stock ($0.10 par value). Additional Paid-In Capital .... Retained Earnings..... Accumulated Other Comprehensive Income. Total Shareholders' Equity...... Total Liabilities and Shareholders' Equity.. $ 6,721 1,964 3,097 $11,782 16,939 2,345 $31,066 $ 68 2,656 12,761 (178) $15,307 $46,373 $ 6,575 1,362 3,180 $11,117 9,925 1,924 $22,966 $ 72 2,387 13,417 (243) $15,633 $38,599 $ 6,268 753 2,567 $ 9,588 10,582 2,083 $22,253 $ 73 2,121 12,013 (2) $14,205 $36,458 $ 5,779 504 1,937 $ 8,220 10,216 2,010 $20,446 $ 74 1,810 11,148 (3) $13,029 $33,475 Cengage Leaming 2014 ... EXHIBIT 7.18 Bullseye Corporation Comparative Statement of Cash Flows (amounts in millions of US$) (Problem 25) For the Year Ended December 31 2013 2012 2011 $ 2,849 $ 2,787 $ 2,408 OPERATIONS Net Income ... Additions and Subtractions: Depreciation Expense... Other Addbacks and Subtractions.. (Increase) Decrease in Accounts Receivable. (Increase) Decrease in Inventories... (Increase) Decrease in Prepayments... Increase (Decrease) in Accounts Payable. Increase (Decrease) in Other Current Liabilities Cash Flow from Operations .... 1,659 485 (602) (525) (38) 111 186 $ 4,125 1,496 296 (226) (431) (25) 435 530 $ 4,862 1,409 474 (244) (454) (52) 489 421 $ 4,451 $ (4,369) (1,826) $ (6,195) $ (3,928) (765) $ (4,693) $ (3,388) (761) $(4,149) INVESTING Acquisitions of Property, Plant, and Equipment. Other Investing Transactions... Cash Flow from Investing .. FINANCING Increase (Decrease) in Short-Term Borrowing. . Increase in Long-Term Borrowing... Issue of Common Stock ..... Decrease in Long-Term Borrowing Acquisition of Common Stock ... Dividends Other Financing Transactions Cash Flow from Financing. Net Change in Cash ..... Cash, Beginning of Year. Cash, End of Year. $ 500 7,617 210 (1,326) (2,808) (442) (44) $ 3,707 $ 1,637 813 $ 2,450 $ 1,256 181 (1,155) (901) (380) (5) $ (1,004) $ (835) 1,648 $ 813 913 231 (527) (1,197) (318) (1) $ (899) $ (597) 2,245 $ 1,648 Cengage Leaming 2014 31. Preparing pro forma financial statements (requires Appendix 7.1). Problem 25 presents financial statements for Bullseye Corporation for its fiscal years ending December 31, 2011, 2012, and 2013, as well as financial statement ratios. a. Prepare a set of pro forma financial statements for Bullseye Corporation for fiscal years 2014 through 2018 using the assumptions detailed below. b. Describe actions that Bullseye might take to deal with the shortage of cash projected in part a. c. What are the likely reasons for the projected changes in the return on equity? EXHIBIT 7.16 Bullseye Corporation Comparative Income Statement (amounts in millions of US$) (Problem 25) For the Year Ended December 31 2013 2012 2011 $61,471 $57,878 $51,271 1,918 1,637 1,376 63,389 59,515 52,647 Sales Revenue Other Revenues. Total Revenues Less Expenses: Cost of Goods Sold Selling and Administrative. Interest ... Total... Income Before Income Taxes. Income Tax Expense Net Income Cengage Learning 2014 41,895 16,200 669 58,764 4,625 1,776 $ 2,849 39,399 15,022 597 55,018 4,497 1,710 $ 2,787 34,927 13,370 490 48,787 3,860 1,452 $ 2,408 EXHIBIT 7.17 Bullseye Corporation Comparative Balance Sheet (amounts in millions of US$) (Problem 25) December 31 2012 2011 2013 2010 ASSETS Cash.... Accounts Receivable (net) Inventories Prepayments Total Current Assets. Property, Plant, and Equipment (net). Other Noncurrent Assets... Total Assets... $ 2,450 8,054 6,780 1,622 $18,906 25,908 1,559 $46,373 $ 813 6,194 6,254 1,445 $14,706 22,681 1,212 $38,599 $ 1,648 5,666 5,838 1,253 $14,405 20,501 1,552 $36,458 $ 2,245 5,069 5,384 1,224 $13,922 18,042 1,511 $33,475 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts Payable .... Current Portion of Long-Term Debt. Other Current Liabilities. .. Total Current Liabilities Long-Term Debt .... Other Noncurrent Liabilities Total Liabilities. .... Common Stock ($0.10 par value). Additional Paid-In Capital .... Retained Earnings..... Accumulated Other Comprehensive Income. Total Shareholders' Equity...... Total Liabilities and Shareholders' Equity.. $ 6,721 1,964 3,097 $11,782 16,939 2,345 $31,066 $ 68 2,656 12,761 (178) $15,307 $46,373 $ 6,575 1,362 3,180 $11,117 9,925 1,924 $22,966 $ 72 2,387 13,417 (243) $15,633 $38,599 $ 6,268 753 2,567 $ 9,588 10,582 2,083 $22,253 $ 73 2,121 12,013 (2) $14,205 $36,458 $ 5,779 504 1,937 $ 8,220 10,216 2,010 $20,446 $ 74 1,810 11,148 (3) $13,029 $33,475 Cengage Leaming 2014 ... EXHIBIT 7.18 Bullseye Corporation Comparative Statement of Cash Flows (amounts in millions of US$) (Problem 25) For the Year Ended December 31 2013 2012 2011 $ 2,849 $ 2,787 $ 2,408 OPERATIONS Net Income ... Additions and Subtractions: Depreciation Expense... Other Addbacks and Subtractions.. (Increase) Decrease in Accounts Receivable. (Increase) Decrease in Inventories... (Increase) Decrease in Prepayments... Increase (Decrease) in Accounts Payable. Increase (Decrease) in Other Current Liabilities Cash Flow from Operations .... 1,659 485 (602) (525) (38) 111 186 $ 4,125 1,496 296 (226) (431) (25) 435 530 $ 4,862 1,409 474 (244) (454) (52) 489 421 $ 4,451 $ (4,369) (1,826) $ (6,195) $ (3,928) (765) $ (4,693) $ (3,388) (761) $(4,149) INVESTING Acquisitions of Property, Plant, and Equipment. Other Investing Transactions... Cash Flow from Investing .. FINANCING Increase (Decrease) in Short-Term Borrowing. . Increase in Long-Term Borrowing... Issue of Common Stock ..... Decrease in Long-Term Borrowing Acquisition of Common Stock ... Dividends Other Financing Transactions Cash Flow from Financing. Net Change in Cash ..... Cash, Beginning of Year. Cash, End of Year. $ 500 7,617 210 (1,326) (2,808) (442) (44) $ 3,707 $ 1,637 813 $ 2,450 $ 1,256 181 (1,155) (901) (380) (5) $ (1,004) $ (835) 1,648 $ 813 913 231 (527) (1,197) (318) (1) $ (899) $ (597) 2,245 $ 1,648 Cengage Leaming 2014