Income Statement Year 1 Year 2 1 Revenues Cost of goods sold Gross profit SGRA Depreciation Operating Profit Interest expense Income before taxes Taxas 3536 Net Income Year 17.000 9 200 7.800 4,790 1.700 1.310 Create pro forma financial statements from the information provided below Year 1 Year 1 som size Sales revenues increase 3.0% 100.00% Gross margin is 40% SG&A decreases by 2.0% $3000 of PP&E is purchased on January 1. New PP&E is depreciated over 10 years Inventory grows in line with COGS Assume that all other asset accounts grow at the same rate as sales Accounts Payable grow at the same rate as COGS Accrued and deferred income taxes grows at the same rate as tax expense. Long-term debt increases by $500 Unless otherwise stated liability accounts grow at the same rate as sales Treasury Steck purchases equal 5300 Average interest cost of all interest beanng debt is 2.0% Dividend payout ratio is 20% Tax rate is 35% Funding requirements should be financed with short-term debt 1.155 404 751 Dividends Addition to retained earrings Balance Sheet Assets Year Year 1 Year SY2 Cash and cash equivalents Marketable securities Accounts Receivables Inventory Prepaid expen. & other assets Total Current Assets 18.200 I 3.142 1.323 13.333 7,607 Plant property and equipment (gross) Accumulated Depreciation PPSE (net) 13.000 Sales revenue declina by 2.5% Gross margin increases to 50% Inventory grows in line with COGS SGRA increases by 1% $600 of PP&E(net) is sold on January 1 for $600 cash. (Gross =$800, Accumulated depreciation = $200) Annual depreciation expense declines by $40 Assume that all other asset accounts change at the same rate as sales Accounts Payable grow change at the same rate as COGS Long-term debt declines by $150 Accrued and deferred income taxes change at the same rate as tax expense Unless otherwise stated liability accounts change at the same rate as sales 100.00% Treasury Stock purchase is $200 Average interest cost of all interest bearing debt is 2.1% Year 1 Dividend payout ratio changes to 22% com, size Tax rate is 35% Funding requirements should be financed with short-term debt Excess cash is used to retire short-term debt 200 shares of S1 par value common stock is issued for $800 Do not add significant amounts to cash unless Loans & notes payable is drawn down to zero. Total Avels 17.940 Liabilities & Shareholders' Equity Year 1 Year 2 Accounts payable Loans & notes payable (plug) Accrued income taxes Total Current Liabilities Year 0 3.148 2.423 1322 6.833 2.800 Long-term debl Defered income taxes 195 Shareholders' Equity 860 1853 Common Stock at par Capital Surplus Retained earnings Less treasury stock Total equity 6.429 (100 18052 Total liabilities & shareholder equity 17,940 100.00% Year 1 Year 2 Statement of Retained Earnings Beginning relained earnings Net Income -dividends Ending retained earnings Statement of Cash Flows Net Income + Depreciation + increaso) decrease in AR + increase) decrease in inventory + increase) decrease in prepaid exp. + increase (decrescAP - increase decrease) in accrued taxes increase (decrease in deferred taxes -Cash Flow from operations + increase) decrease in marketable see + Increaso decrease in PPE -Cash Flow from investing - increase (decrease) in loans and notes increase decrease) in cur, port of LTD - Increase (decrease) in LTD + increase (decrease) in common stock - dividends - treasury stock -Cash flow from financing Beginning cash +Change in cash Ending cash Income Statement Year 1 Year 2 1 Revenues Cost of goods sold Gross profit SGRA Depreciation Operating Profit Interest expense Income before taxes Taxas 3536 Net Income Year 17.000 9 200 7.800 4,790 1.700 1.310 Create pro forma financial statements from the information provided below Year 1 Year 1 som size Sales revenues increase 3.0% 100.00% Gross margin is 40% SG&A decreases by 2.0% $3000 of PP&E is purchased on January 1. New PP&E is depreciated over 10 years Inventory grows in line with COGS Assume that all other asset accounts grow at the same rate as sales Accounts Payable grow at the same rate as COGS Accrued and deferred income taxes grows at the same rate as tax expense. Long-term debt increases by $500 Unless otherwise stated liability accounts grow at the same rate as sales Treasury Steck purchases equal 5300 Average interest cost of all interest beanng debt is 2.0% Dividend payout ratio is 20% Tax rate is 35% Funding requirements should be financed with short-term debt 1.155 404 751 Dividends Addition to retained earrings Balance Sheet Assets Year Year 1 Year SY2 Cash and cash equivalents Marketable securities Accounts Receivables Inventory Prepaid expen. & other assets Total Current Assets 18.200 I 3.142 1.323 13.333 7,607 Plant property and equipment (gross) Accumulated Depreciation PPSE (net) 13.000 Sales revenue declina by 2.5% Gross margin increases to 50% Inventory grows in line with COGS SGRA increases by 1% $600 of PP&E(net) is sold on January 1 for $600 cash. (Gross =$800, Accumulated depreciation = $200) Annual depreciation expense declines by $40 Assume that all other asset accounts change at the same rate as sales Accounts Payable grow change at the same rate as COGS Long-term debt declines by $150 Accrued and deferred income taxes change at the same rate as tax expense Unless otherwise stated liability accounts change at the same rate as sales 100.00% Treasury Stock purchase is $200 Average interest cost of all interest bearing debt is 2.1% Year 1 Dividend payout ratio changes to 22% com, size Tax rate is 35% Funding requirements should be financed with short-term debt Excess cash is used to retire short-term debt 200 shares of S1 par value common stock is issued for $800 Do not add significant amounts to cash unless Loans & notes payable is drawn down to zero. Total Avels 17.940 Liabilities & Shareholders' Equity Year 1 Year 2 Accounts payable Loans & notes payable (plug) Accrued income taxes Total Current Liabilities Year 0 3.148 2.423 1322 6.833 2.800 Long-term debl Defered income taxes 195 Shareholders' Equity 860 1853 Common Stock at par Capital Surplus Retained earnings Less treasury stock Total equity 6.429 (100 18052 Total liabilities & shareholder equity 17,940 100.00% Year 1 Year 2 Statement of Retained Earnings Beginning relained earnings Net Income -dividends Ending retained earnings Statement of Cash Flows Net Income + Depreciation + increaso) decrease in AR + increase) decrease in inventory + increase) decrease in prepaid exp. + increase (decrescAP - increase decrease) in accrued taxes increase (decrease in deferred taxes -Cash Flow from operations + increase) decrease in marketable see + Increaso decrease in PPE -Cash Flow from investing - increase (decrease) in loans and notes increase decrease) in cur, port of LTD - Increase (decrease) in LTD + increase (decrease) in common stock - dividends - treasury stock -Cash flow from financing Beginning cash +Change in cash Ending cash