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Provincial Imports, Inc. Income Statement for the Year Just Ended

$\backslash$table$[[$Sales revenue,$$4,996,000$

Integrative$-$Pro forma statements Provincial Imports, Inc., has assembled last year's financial statements $($income statement and balance sheet $)$ and financial projections for use in preparing financial plans for the coming year.

Information related to financial projections for next year is as follows:

$(1)$ Projected sales are $$5,996,000.$

$(2)$ Cost of goods sold last year includes $$1,001,000$ in fixed costs.

$(3)$ Operating expense last year includes $$258,000$ in fixed costs.

$(4)$ Interest expense will remain unchanged.

$(5)$ The firm will pay cash dividends amounting to $45\%$ of net profits after taxes.

$(6)$ Cash and inventories will double.

$(7)$ Marketable securities$,$ notes payable, long$-$term debt, and common stock will remain unchanged.

$(8)$ Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales.

$(9)$ A new computer system costing $$357,000$ will be purchased during the year. Total depreciation expense for the year will be $$116,000.$

$(10)$ The tax rate will remain at $40\%.$

a$.$ Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent$-$of$-$sales method.

b$.$ Prepare a pro forma balance sheet for next year, using the information given and the judgmental approach. Include a reconciliation of the retained earnings account.

c$.$ Analyze these statements, and discuss the resulting external financing required.