Attached are financial statements for Attila Ltd. for the year that just ended. The company is considering a new strategy for the upcoming year with the following elements: 1. The new marketing manager has convinced the owners to boost the marketing budget. The company will now spend 20% more than last year on advertising and promotion, and as a result expects sales to increase by 25% in the coming year. 2. The cost of goods sold is expected to be lower, dropping by 5 percentage points relative to sales. 3. They also plan keep the same closing inventory level as in the previous year, even though their sales are expected to be higher. They will achieve this by buying $55,000 of new equipment that will make the company's manufacturing operations more efficient. The new equipment is expected to be delivered on June 30th, and will be financed entirely by an equipment lease. It will and will be depreciated over 10 years (all capital assets are depreciated on a straight-line basis). This new equipment will add $15,000 to current annual maintenance costs. All other accounts will maintain their current proportion to sales revenues, except as follows: - Salaries are expected to go up by 3.5% - The income tax rate will remain the same. - No new shares will be issued. But the paid dividends will increase by 50%. - Annual depreciation amounts for the existing assets will stay the same. - Existing long-term liabilities and capital assets will be unchanged. - A regularly scheduled rent increase of 15% is scheduled for July 1th. ASSIGNMENT: Based on the above information, prepare a proforma income statement, balance sheet, cashflow, and statement of retained earnings for Attila Ltd. for the upcoming year. Use Cash as the "plug" number on the balance sheet. \begin{tabular}{|lrc|} \hline Attila Ltd. & & \\ Income Statement \\ For the Year Just Ended \\ (in \$ thousands) & & \\ & & \\ Sales Revenue & 425 & \\ Less Cost of Goods Sold: & 780 & \\ Opening Inventory & 505 & \\ Add: Purchases & & 700 \\ Closing Inventory & & 825 \\ Cost of Goods Sold & 180 & \\ \hline Gross Profit & 225 & \\ Operating Expenses: & 88 & \\ Rent and Occupancy & 58 & \\ Salaries/Bonuses & 20 & \\ Ad \& Promo & 12 & \\ Maintenance & 30 & \\ Building depreciation & & 613 \\ Furniture depreciation & & 212 \\ Vehicle depreciation & & 34 \\ \hline TOTAL OpEx & & 178 \\ \hline Earnings Before Tax (Operating Income) & & \\ Income Tax & & \\ \hline Net Income & & \\ \hline \end{tabular} Attila Ltd. Statement of Retained Earnings For the Year Just Ended (in $ thousands) Opening Retained Earnings Plus: Net Profit (Loss) Minus: Dividends Closing Retained Earnings 482 178 80 580
