Consider the following financial statements for Industrial Supply Company. (Actual) December 31,

Balance sheet Year 1 Comments Assets Cash $ 550,000 25% increase (assumption) Accounts receivable 2,200,000 25% increase (assumption) Inventories 1,650,000 25% increase (assumption) Total current assets $ 4,400,000 Fixed assets, net $ 1,100,000 25% increase (assumption) Total assets (A) $ 5,500,000 Liabilities and Equity Accounts payable (CL) $ 1,400,000 25% increase (assumption) Notes payable 300,000 Total current liabilities $ 1,700,000 Long-term debt 500,000 No change (assumption) Stockholders equity 3,300,000 Total liabilities and equity $ 5,500,000 Income Statement Year 1 Sales (S) $14,700,000 25% increase (forecasted) Expenses, including interest & taxes 14,000,000 Earnings after taxes (EAT) $ 700,000 Dividends paid (D) 250,000 No change (assumption) Retained earnings $ 450,000 Selected Financial Ratios Current ratio 2.59 times Debt ratio 40.00% Return on stockholders equity 21.21% Net profit margin on sales 4.76%

Determine the amount of additional financing needed and pro forma financial statements (that is, balance sheet, income statement, and selected financial ratios) for Year 2 under the following conditions: Increase in Sales Increase in Expenses $3,675,000 $3,500,000

Assume the following:

The company plans to maintain its dividend payments and long-term debt at the same level in Year 2 as in Year 1.

All of the additional financing needed is in the form of short-term notes payable.

Levels of cash, accounts receivable, inventories, net fixed assets and accounts payable increase proportionately as sales increase.

Round your answers in dollar form to the nearest dollar. Round your answers for financial ratios to two decimal places.

Additional Financing Needed: $

(Actual) (Pro forma) December 31, December 31, Balance sheet Year 1 (given) Year 2 (need answers)

Assets

Cash $ 550,000

Accounts receivable 2,200,000

Inventories 1,650,000

Total current assets $ 4,400,000

Fixed assets, net $ 1,100,000

Total assets (A) $ 5,500,000

Liabilities and Equity Accounts payable (CL) $ 1,400,000

Notes payable 300,000

Total current liabilities $ 1,700,000

Long-term debt 500,000

Stockholders equity 3,300,000

Total liabilities and equity $ 5,500,000

Income Statement Year 1 Year 2

Sales (S) $14,700,000

Expenses, including interest & taxes 14,000,000

Earnings after taxes (EAT) $ 700,000

Dividends paid (D) 250,000

Retained earnings $ 450,000

Selected Financial Ratios

Current ratio 2.59 times

times

Debt ratio 40.00%

%

Return on stockholders equity

21.21%

%

Net profit margin on sales

4.76%

%