Green Company

Corporate Takeover Case

Part I of this case involves completing the 13 requirements below in order to prepare pro forma 2021 financial statements for the Green Company. (See Consolidations Flowchart under Week 11 on Blackboard for Requirement 1.)

Use the following assumptions to project Green Company's 2021 financial statements:

1. All sales will be on account and are expected to increase by 12% in 2021.
2. Accounts receivable will be 5% lower on December 31, 2021 than on December 31, 2020.
3. All purchase of merchandise will be on account.
4. Cost of goods sold will increase by 10% in 2021.
5. Accounts payable are expected to be $25,000 on December 31, 2021.
6. Inventory will be 3% higher on December 31, 2021 than on December 31, 2020.
7. Straight line depreciation is used for all fixed assets.
8. No fixed assets will be disposed of during 2021. The annual depreciation of existing assets is $20,000 per year.
9. Equipment will be purchase on January 1, 2021 for $30,000 cash. The equipment will have an estimated life of 10 years with no salvage value.
10. Operating expenses, other than depreciation, will increase by 10% in 2021.
11. All operation expenses, other than depreciation, will be paid in cash.
12. Green Company's income tax rate is 40% and taxes are paid in cash in four equal payments. Payments will be made on the 15^th of April, June, September and December. For simplicity, assume taxable income equals financial reporting income before taxes.
13. Green Company will continue the $1.00 per share annual cash dividend on its common stock.

All Entries should be in the form of a Debit and a Credit. Make sure your columns balance at all times.

Forecast the separate financial statements of Green Company. Using Ms. Lake's assumptions and Green's 2020 financial statements, prepare pro forma 2021 financial statements for Green Company assuming that the acquisition is not attempted.

Forecast the separate financial statements of Green Company. Using Ms. Lake's assumptions and Green's 2020 financial statements, prepare pro forma 2021 financial statements for Green Company assuming that the acquisition is not attempted. Green Company - Actual financial statements for 2020 Green Company 2020 Actual Sales 400,000 Cost of Goods Sold (243,000) Operating Expenses (110,000) Income Before Taxes 47,000 Income Tax Expenses (18,800) Net Income 28,200 Retained Earnings January 1 21,500 Add Net Income 28,200 Deduct Dividends (19,000) Retained Earnings December 31 30,700 Cash 18, 100 Accounts Receivable 18,500 Inventory 13,000 Property, Plant and Equipment 336,500 d Depreciation (245,000) Total Assets 141,100 Accounts Payable 21,900 Common Stock* 85,000 Paid-in Capital in Excess in Par 3,500 Retained Earnings 30,700 Total Equities and Liabilities $ 141,100 * Green Company: $6.50 par value