Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ashmont Cycles Corporation estimates its sales for the 2021 financial year will be $500,000. No new borrowing was obtained and therefore, the interest expense will

image text in transcribed
image text in transcribed
image text in transcribed
Ashmont Cycles Corporation estimates its sales for the 2021 financial year will be $500,000. No new borrowing was obtained and therefore, the interest expense will remain unchanged $1,200 during 2021. Compile the Pro forma Income statement for Ashmont Cycles Corporation for the year 2021 using percent of sales method. (3 marks) Ashmont Cycles Income Statement 2020 2019 Sales $205,000 $155,000 Cost of goods sold (106,000) (85,000) Gross Profit 99,000 70,000 Operating Expense: Selling, general and administrative expenses (58,000) (40,000) Utilities expense (6,960) (5,000) Rent expense (16,240) (10,000) Depreciation and amortization (1,080) (1,080) Total operating expenses (82,280) (56,080) Operating Income 16,720 13,920 Interest expense (1.200) (1,200) Income before Income Taxes 15,520 12,720 Income taxes (35%) (5,432) (4,452) Net Income $10,088 $8,268 Ashmont Cycles Balance Sheet As of December 31, 2019 and 2020 2019 2020 $8,000 $3,368 $2,500 $2,200 $65,000 $71,500 $1,500 $1,800 $500 $600 $77,500 $79,468 $12,000 $17,400 ($2,400) ($3.480) $9,600 $13,920 $87,100 $93,388 Assets Cash Accounts receivable Inventory Prepaid expenses Other current assets Total current assets Property, plant, and equipment Accumulated depreciation Net property, plant, and equipment Total Assets Liabilities Accounts payable Line of credit Current portion of long-term debt Accrued expenses Total Current Liabilities Long-term debt Total Liabilities Owner's Equity Contributed capital Retained earnings Total Owner's Equity $3,000 $3,200 $10,000 $10,000 $4,000 $4,000 $1,100 $1,100 $18,100 $18,300 $16,000 $12,000 $34,100 $30,300 $50,000 $50,000 $3,000 $13,088 $53,000 $63,088

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Managerial Finance Brief

Authors: Chad J. Zutter, Scott B. Smart

8th Global Edition

1292267143, 978-1292267142

More Books

Students also viewed these Finance questions

Question

Identify and discuss learning style differences across cultures

Answered: 1 week ago