5.
Pro forma balance sheet Peabody & Peabody has 2019 sales of $10.5 million. It wishes to analyze expected performance and financing needs for 20212 years ahead. Given the following information, respond to parts a. and b. (1) The percents of sales for items that vary directly with sales are as follows: Accounts receivable; 12.3%, Inventory; 18.2%; Accounts payable, 14.3%; Net profit margin, 3.3%. (2) Marketable securities and other current liabilities are expected to remain unchanged. (3) A minimum cash balance of $485,000 is desired. (4) A new machine costing $651,000 will be acquired in 2020, and equipment costing $847,000 will be purchased in 2021. Total depreciation in 2020 is forecast as $289,000, and in 2021 $386,000 of depreciation will be taken. (5) Accruals are expected to rise to $499,000 by the end of 2021. (6) No sale or retirement of long-term debt is expected. (7) No sale or repurchase of common stock is expected. (8) The dividend payout of 50% of net profits is expected to continue. (9) Sales are expected to be $11.4 million in 2020 and $11.6 million in 2021. (10) The December 31, 2019, balance sheet is here . a. Prepare a pro forma balance sheet dated December 31, 2021. b. Discuss the financing changes suggested by the statement prepared in part (a). Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Leonard Industries Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' Equity Cash $402,000 Accounts payable Marketable securities 198,000 Accruals Accounts receivable 1,204,000 Other current liabilities Inventories 1,802,000 Total current liabilities Total current assets $3,606,000 Long-term debt Net fixed assets 3,999,000 Common stock Total liabilities and Total assets $7,605,000 stockholders' equity $1,395,000 405,000 80,100 $1,880,100 2,007,900 3,717,000 $7,605,000 Print Done Pro forma balance sheet Peabody & Peabody has 2019 sales of $10.5 million. It wishes to analyze expected performance and financing needs for 20212 years ahead. Given the following information, respond to parts a. and b. (1) The percents of sales for items that vary directly with sales are as follows: Accounts receivable; 12.3%, Inventory; 18.2%; Accounts payable, 14.3%; Net profit margin, 3.3%. (2) Marketable securities and other current liabilities are expected to remain unchanged. (3) A minimum cash balance of $485,000 is desired. (4) A new machine costing $651,000 will be acquired in 2020, and equipment costing $847,000 will be purchased in 2021. Total depreciation in 2020 is forecast as $289,000, and in 2021 $386,000 of depreciation will be taken. (5) Accruals are expected to rise to $499,000 by the end of 2021. (6) No sale or retirement of long-term debt is expected. (7) No sale or repurchase of common stock is expected. (8) The dividend payout of 50% of net profits is expected to continue. (9) Sales are expected to be $11.4 million in 2020 and $11.6 million in 2021. (10) The December 31, 2019, balance sheet is here . a. Prepare a pro forma balance sheet dated December 31, 2021. b. Discuss the financing changes suggested by the statement prepared in part (a). Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Leonard Industries Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' Equity Cash $402,000 Accounts payable Marketable securities 198,000 Accruals Accounts receivable 1,204,000 Other current liabilities Inventories 1,802,000 Total current liabilities Total current assets $3,606,000 Long-term debt Net fixed assets 3,999,000 Common stock Total liabilities and Total assets $7,605,000 stockholders' equity $1,395,000 405,000 80,100 $1,880,100 2,007,900 3,717,000 $7,605,000 Print Done
