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forma statements Provincial Imports, Inc., has assembled past (2015) financial statements (income statement and balance sheet and financial projections for use in preparing financial plans for the coming year (2016).

2015 Statement:

for the Year Ended December 31, 2015 Sales revenue $4,991,000 Less: Cost of goods sold 2,746,000 Gross profits $2,245,000 Less: Operating expenses 855,000 Operating profits $1,390,000 Less: Interest expense 194,000 Net profits before taxes $1,196,000 Less: Taxes (rate=40%) 478,400 Net profits after taxes $717,600 Less: Cash dividends 251,160 To retained earnings $466,440

Provincial Imports, Inc. Balance Sheet December 31, 2015 Assets Liabilities and Stockholders' Equity Cash $199,000 Accounts payable $705,000 Marketable securities 221,000 Taxes payable 95,000 Accounts receivable 617,000 Notes payable 192,000 Inventories 507,000 Other current liabilities 5,200 Total current assets $1,544,000 Total current liabilities $997,200 Net fixed assets 1,394,000 Long-term debt 477,800 Common stock 78,000 Retained earnings 1,385,000 Total assets $2,938,000 Total liabilities and equity $2,938,000

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

(1) Projected sales are $6,001,000.

(2) Cost of goods sold in 2015 includes $995,000 in fixed costs.

(3) Operating expense in 2015 includes $252,000 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 $361,000 will be purchased during the year. Total depreciation expense for the year will be $102,000.

(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	$	6001000
Less: Cost of goods sold		995000
Gross profits	$	5006000
Less: Operating expenses		252000
Operating profits	$	4754000
Less: Interest expense		194000
Net profits before taxes	$	4560000
Less: Taxes (rate = 40%)		1824000
Net profits after taxes	$	2736000
Less: Cash dividends (35%)		957600
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

19.8579 %19.8579%

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

19.8579 %19.8579%

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	$	398000
Marketable securities		221000
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.)