BALANCE SHEET

ZZZ MATRESS COMPANY

DECEMBER 31, 2015

ASSETS

CASH $1,500

ACCOUNTS RECEIVABLE $60,000

INVENTORY $95,000

TOTAL CURRENT ASSETS $156,500

NET PLANT AND EQUIPMENT $150,000

TOTAL ASSETS $306,500

LIABILITIES AND EQUITIES

ACCOUNT PAYABLE $ 45,500

NOTES PAYABLE 55,000

ACCRUALS 5,000

TOTAL CURRENT LIABILITIES $105,500

LONG-TERM DEBTS 55,000

STOCKHOLDERS EQUITY :

COMMON STOCK $71,000

RETAINED EARINGS 75,000

TOTAL LIABILITIES AND EQUITIES $306,500

INCOME STATEMENT

ZZZ MATTRESS COMPANY

FOR THE YEAR ENDED DECEMBER 31,2015

SALES $300,000

LESS COST OF GOOD SOLD 195,000

GROOS PROFIT $105,000

LESS SELLING EXPENSE 40,000

GENERAL AND ADMINISTRATIVE EXPENSE 11,000

LESS DEPRECIATION 10,000

OPERATING PROFIT $44,000

LESS INTERESR 12,000

NET PROFIT BEFORE TAXES $32,000

LESS TAXES (40%) 12,800

$19,200

The ZZZ Mattress Co. has been requested by the 1st National Bank, a major creditor, to prepare a pro forma balance sheet for the year ending, December 31, 2016. Using the percent-of-sales method and the following financial data, prepare the pro forma income statement and discuss the results. (See the statements above) 2016 sales are estimated at $330,000. Accounts receivable represent 20 percent of sales. A minimum cash balance of $1,650 is maintained. Inventory represents 32 percent of sales. Fixed-asset outlays in 2006 are $20,000. Total depreciation expense for 2016 will be $15,000. Accounts payable represents 15 percent of sales. Notes payable and accruals will remain the same. No long-term debt will be retired in 2016. No common stock will be repurchased in 2016. The firm will pay dividends equal to 50 percent of its earnings after taxes. The ZZZ Mattress Co. has been requested by the 1st National Bank, a major creditor, to prepare a pro forma balance sheet for the year ending, December 31, 2016. Using the percent-of-sales method and the following financial data, prepare the pro forma income statement and discuss the results. (See the statements above) 2016 sales are estimated at $330,000. Accounts receivable represent 20 percent of sales. A minimum cash balance of $1,650 is maintained. Inventory represents 32 percent of sales. Fixed-asset outlays in 2006 are $20,000. Total depreciation expense for 2016 will be $15,000. Accounts payable represents 15 percent of sales. Notes payable and accruals will remain the same. No long-term debt will be retired in 2016. No common stock will be repurchased in 2016. The firm will pay dividends equal to 50 percent of its earnings after taxes