for the Year Ended December 31, 2015 Sales revenue $5,001,000 Less: Cost of goods sold 2,745,000 Gross profits $2,256,000 Less: Operating expenses 844,000 Operating profits $1,412,000 Less: Interest expense 191,000 Net profits before taxes $1,221,000 Less: Taxes (rate=40%) 488,400 Net profits after taxes $732,600 Less: Cash dividends 329,670 To retained earnings $402,930

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Pro

forma statementsProvincial Imports, Inc., has assembled past (2015) financial statements (income statement and balance sheet

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) and financial projections for use in preparing financial plans for the coming year (2016).

Information related to financial projections for the year 2016 is as follows:

(1) Projected sales are

$ 6 comma 008 comma 000

.

(2) Cost of goods sold in 2015 includes

$ 990 comma 000

in fixed costs.

(3) Operating expense in 2015 includes

$ 254 comma 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

$ 348 comma 000

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

$ 106 comma 000

.

(10) The tax rate will remain at

40 %

.

a. Prepare a pro forma income statement for the year ended December 31, 2016, 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, 2016, 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.

a. Prepare a pro forma income statement for the year ended December 31, 2016, using the fixed cost data given to improve the accuracy of the percent-of-sales method.

Complete the pro forma income statement for the year ended December 31, 2016 below:(Round to the nearest dollar.)

Pro Forma Income Statement
Provincial Imports, Inc.
for the Year Ended December 31, 2016
(percent-of-sales method)
Sales	$
Less: Cost of goods sold
Gross profits	$
Less: Operating expenses
Operating profits	$
Less: Interest expense
Net profits before taxes	$
Less: Taxes (rate = 40%)
Net profits after taxes	$
Less: Cash dividends (45%)
To Retained earnings	$

b. Prepare a pro forma balance sheet as of December 31, 2016, using the information given and the judgmental approach. Include a reconciliation of the retained earnings account. NOTE: Taxes payable for 2015 are about

19.4513 %

of the 2015 taxes on the income statement. The pro forma value is obtained by taking

19.4513 %

of the 2016 taxes.

Complete the assets part of the pro forma balance sheet as of December 31, 2016:(Round to the nearest dollar.)

Pro Forma Balance Sheet
Provincial Imports, Inc.
for the Year Ended December 31, 2016
(Judgmental Method)
Cash	$
Marketable securities
Accounts receivable
Inventories
Total current assets	$
Net fixed assets
Total assets	$

Complete the liabilities and equity part of the pro forma balance sheet as of December 31, 2016:(Round to the nearest dollar.)

Pro Forma Balance Sheet
Provincial Imports, Inc.
for the Year Ended December 31, 2016
(Judgmental Method)
Accounts payable	$
Taxes payable
Notes payable
Other current liabilities
Total current liabilities	$
Long-term debt
Common stock
Retained earnings
External funds required
Total liabilities and stockholders equity	$

c. Using the judgmental approach, the external funds requirement is

$nothing

.

(Round to the nearest dollar.)

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