Class Questions\ (1) Projected sales are

$6,000,000

.\ (2) Cost of goods sold in 2012 includes

$1,000,000

in fixed costs.\ (3) Operating expense in 2012 includes

$250,000

in fixed costs.\ (4) Interest expense will remain unchanged.\ (5) The firm will pay cash dividends amounting to

40%

of net profits after taxe\ (6) Cash and inventories will double.\ (7) Marketable securities, notes payable, long-term debt, and common stock wi remain unchanged.\ (8) Accounts receivable, accounts payable, and other current liabilities will chan in direct response to the change in sales.\ (9) A new computer system costing

$356,000

will be purchased during the year Total depreciation expense for the year will be

$110,000

.\ (10) The tax rate will remain at

40%

.\ a. Prepare a pro forma income statement for the year ended December 31,2013 using the fixed cost data given to improve the accuracy of the percent-of-sales method.\ b. Prepare a pro forma balance sheet as of December 31,2013 , using the inform tion given and the judgmental approach. Include a reconciliation of the retain earnings account.\ c. Analyze these statements, and discuss the resulting external financing requireo

Class Questions (1) Projected sales are $6,000,000. (2) Cost of goods sold in 2012 includes $1,000,000 in fixed costs. (3) Operating expense in 2012 includes $250,000 in fixed costs. (4) Interest expense will remain unchanged. (5) The firm will pay cash dividends amounting to 40% of net profits after taxe (6) Cash and inventories will double. (7) Marketable securities, notes payable, long-term debt, and common stock wi remain unchanged. (8) Accounts receivable, accounts payable, and other current liabilities will chan in direct response to the change in sales. (9) A new computer system costing $356,000 will be purchased during the year Total depreciation expense for the year will be $110,000. (10) The tax rate will remain at 40%. a. Prepare a pro forma income statement for the year ended December 31,2013 using the fixed cost data given to improve the accuracy of the percent-of-sales method. b. Prepare a pro forma balance sheet as of December 31, 2013, using the inform tion given and the judgmental approach. Include a reconciliation of the retain earnings account. c. Analyze these statements, and discuss the resulting external financing required