The Budda-Bing Manufacturing Company Preparing Pro Forma Financial Statements for 2019
Budda-Bing Manufacturing is planning to implement a major plant-modernization program to improve its competitive position. Included will be construction of a state-of- the-art manufacturing facility that will cost $400,000 in 2019 and is expected to lower the company's variable cost per tonne of steel. Tony and Pauli, experienced budget analysts, have been charged with preparing a forecast of the firm's 2019 financial position assuming construction of the proposed new facility. They plan to use the 2018 financial statements presented above along with the forecasts for other financial accounts provided in the following table.

    a. Use the historic and projected financial data provided to prepare a pro forma income statement and balance sheet for the year ended December 31, 2019.

b. Will Budda-Bing Manufacturing Company need to obtain external financing to fund construction of the proposed facility? Explain. Prepare a Statement of EFR.

c. How would you recommend Budda-Bing raise the required Financing? What options might be available if the company wanted to explore all opportunities other than using their line of credit?

Balance Sheet The Budda-Bing Manufacturing Company As at December 31st, 2017 and 2018 December 31 Assets 2017 2018 Current Assets 2$ $ 24,100 763,900 Cash 25,000 Accounts Receivable 805,556 Inventories 763,445 1,551,445 700,625 1,531,181 Total Current Assets Gross fixed assets (at cost) 1,691,707 2,093,819 348,000 1,343,707 $2,895,152 Less: Accumulated Amortization 500,000 1,593,819 $3,125,000 Net fixed assets Total assets Liabilities and Shareholders Equity Current Liabilities $ $ Accounts Payable 400,500 230,000 Line of credit 370,000 311,000 Accruals 100,902 75,000 616,000 Total Current Liabilities 871,402 1,165,250 1,781,250 Long-term debt 700,000 1,571,402 Total Liabilities Shareholders Equity 50,000 293,750 Preferred Shares 50,000 Common Shares 293,750 Retained Earnings 980,000 1,323,750 1,000,000 1,343,750 Total Shareholders Equity Total Liabilities and Shareholders Equity $2,895,152 $3,125,000