Chapter 4 part 1 1. (a) Suppose sales increase by 20%. Assume all items grow at exactly the same rate as sales, create the pro forma inc statement and balance sheet. What is the plug variable? Income statement Balance sheet Sales 1000 Assets 500 Debt 250 Costs 800 Equity 250 Net income 200 Total 500 Total 500 Pro forma Income statement Pro forma Balance sheet Sales Assets Costs Net income Total Dividends Add to RE (b) Suppose the firm decides to retain all the earnings, what is the plug variable? Pro forma Balance sheet Assets Total