ENT$511$

PROFORMA FINANCIAL ASSIGNMENT

Attached are financial statements for Attila Ltd$.$ for the year that just ended. The company is considering a new strategy for the upcoming year with the following elements:

$1.$ A new marketing campaign that involves spending $10\%$ more than last year on ad$/$promo to try to boost sales. They expect sales to therefore go up by $20\%$ in the coming year.

$2.$ Cutting their inventory costs by keeping to the same closing inventory level as in the previous year, even though their sales are expected to be higher.

$3.$ Buying new equipment for $$17,000$ that will use the raw materials more effectively, and therefore allow the planned reduction in inventory. The new equipment will be financed from cash currently on$-$hand, and will be depreciated over $10$ years. All capital assets are depreciated on a straight$-$line basis.

All other current accounts will maintain their current proportion to sales revenues, except as follows:

$$ Purchases will decrease to $60\%$ of sales.

$$ The income tax rate will rise to $22\%.$

$$ No new shares will be issued. But the paid dividends will be doubled.

$$ Assume the same $ amount of annual depreciation for the previous assets.

$$ Existing long$-$term liabilities and capital assets will be unchanged.

ASSIGNMENT:

Prepare a proforma Income Statement, Balance Sheet, Cashflow, and Statement of Retained Earnings for Attila Ltd$.,$ based on the above information, for the upcoming year. Use $$cash$$ as the plug number to balance the Balance Sheet.

This assignment is worth $25\%$ of your grade in this course.

$$

Attila Ltd$.$

Income Statement

For the Year Just Ended

$($in $ thousands$)$

Sales Revenue $523$

Less Cost of Goods Sold: $322$

Opening Inventory $125$

Add: Purchases $340$

Closing Inventory $143$

Gross Profit $201$

Operating Expenses: $90$

Rent and Occupancy $18$

Salaries$/$Bonuses $29$

Ad & Promo $12$

Maintenance $8$

Building depreciation $10$

Furniture depreciation $3$

Vehicle depreciation $10$

Earnings Before Tax $($Operating Income$)111$

Income Tax $21$

Net Income $90$

Attila Ltd$.$

Statement of Retained Earnings

For the Year Just Ended

$($in $ thousands$)$

Opening Retained Earnings $294$

Plus: Net Profit $($Loss$)90$

Minus: Dividends $40$

Closing Retained Earnings $344$

$$

Attila Ltd$.$

Balance Sheet

As at Year$-$End

$($in $ thousands$)$

Current Assets

Cash $117$

Marketable securities $5$

Accounts receivable $163$

Inventory $143$

Total current assets $428$

Property, Plant & Eqpt

Land $120$

Buildings $250$

Accumulated depreciation $(90)$

Furniture & fixtures $76$

Accumulated depreciation $(27)$

Motor vehicles $107$

Accumulated depreciation $(75)$

Total PP&E $361$

Total Assets $789$

Current Liabilities

Bank overdraft $40$

Accounts payable $145$

Total current liabilities $185$

Long$-$term Liabilities

Loans $110$

Leases $23$

Total LT liabilities $133$

Shareholder Equity

Preferred shares $22$

Common shares $105$

Retained earnings $344$

Total shareholder equity $471$

Total Liabilities & Shareholder Equity $789$