Integrativelong dashPro forma statements$$Provincial$$ Imports, Inc., has assembled last$$ year's financial statements$($income statement and balance sheet LOADING...$)$ and financial projections for use in preparing financial plans for the coming year.

Information related to financial projections for next year is as$$ follows:

$(1)$ Projected sales are $ $5$ comma $991$ comma $000.$

$(2)$ Cost of goods sold last year includes $ $996$ comma $000$ in fixed costs.

$(3)$ Operating expense last year includes $ $246$ comma $000$ in fixed costs.

$(4)$ Interest expense will remain unchanged.

$(5)$ The firm will pay cash dividends amounting to $35\%$ 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 $ $359$ comma $000$ will be purchased during the year. Total depreciation expense for the year will be $ $109$ comma $000.$

$(10)$ The tax rate will remain at $40\%.$

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

b$.$ Prepare a pro forma balance sheet for next$$ year, 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.

Question content area bottom

Part $1$

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

Part $2$

Complete the pro forma income statement for next year$$ below:$($Round to the nearest$$ dollar.$)$

Pro Forma Income Statement

Provincial Imports, Inc.

for Next Year

$($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 $(35\%)$

To Retained earnings

$