Homework: Chapter 4

Question 9, P4-18 (similar to)

Part 2 of 4

HW Score: 63.52%, 5.72 of 9 points

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Part 1

Pro forma balance

sheetBasic

Leonard Industries wishes to prepare a pro forma balance sheet for December 31,

2020.

The firm expects

2020

sales to total

$3,000,000.

The following information has been gathered.(1) A minimum cash balance of

$49,600

is desired.

(2) Marketable securities are expected to remain unchanged.

(3) Accounts receivable represent

9.8%

of sales.(4) Inventories represent

11.8%

of sales.(5) A new machine costing

$89,800

will be acquired during

2020.

Total depreciation for the year will be

$32,000.

(6) Accounts payable represent

14.3%

of sales.

(7) Accruals, other current liabilities, long-term debt, and common stock are expected to remain unchanged.

(8) The firm's net profit margin is

3.6%,

and it expects to pay out

$70,400

in cash dividends during

2020.

(9) The December 31,

2019,

balance sheet follows

LOADING...

.a. Use the judgmental approach to prepare a pro forma balance sheet dated December 31,

2020,

for Leonard Industries.b. How much, if any, additional financing will Leonard Industries require in

2020?

Discuss.c. Could Leonard Industries adjust its planned

2020

dividend to avoid the situation described in part

b?

Explain how.

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Part 1

a. Use the judgmental approach to prepare a pro forma balance sheet dated December 31,

2020,

for Leonard Industries.

Part 2

Complete the assets part of the pro forma balance sheet for Leonard Industries for December 31,

2020

below:(Round to the nearest dollar.)

Pro Forma Balance Sheet
Leonard Industries
December 31, 2020
Assets
Current assets
Cash	$	49,600
Marketable securities		14,900
Accounts receivable		294,000
Inventories		354,000
Total current assets	$	712,500
Net fixed assets		657,400
Total assets	$	1,369,900

Part 3

Complete the liabilities and stockholders' equity part of the pro forma balance sheet for Leonard Industries for December 31,

2020

below:(Round to the nearest dollar.)

Pro Forma Balance Sheet
Leonard Industries
December 31, 2020
Liabilities and stockholders equity
Current liabilities
Accounts payable	$
Accruals
Other current liabilities
Total current liabilities	$
Long-term debt
Total liabilities	$
Common stock
Retained earnings
Total stockholders equity	$
External funds required
Total liabilities and stockholders equity	$

Assets

Liabilities and Stockholders' Equity

Cash

$45,100

Accounts payable

$394,700

Marketable securities

14,900

Accruals

59,900

Accounts receivable

255,100

Other current liabilities

30,500

Inventories

339,500

Total current liabilities

$485,100

Total current assets

$654,600

Long-term debt

348,900

Net fixed assets

599,600

Common stock

200,000

Retained earnings

220,200

Total assets

$1,254,200

Total liabilities and stockholders' equity

$1,254,200