IntegrativePro forma statements Provincial Imports, Inc., has assembled past (2019) financial statements income statement and balance sheet :) and financial projections for use in preparing financial plans for the coming year (2020). Information related to financial projections for the year 2020 is as follows: (1) Projected sales are $5,995,000. (2) Cost of goods sold in 2019 includes $1,000,000 in fixed costs. (3) Operating expense in 2019 includes $258,000 in fixed costs. (4) Interest expense will remain unchanged. (5) The firm will pay cash dividends amounting to 40% 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 $355,000 will be purchased during the year. Total depreciation expense for the year will be $116,000. (10) The tax rate will remain at 40%. a. Prepare a pro forma income statement for the year ended December 31, 2020, 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, 2020, 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, 2020, 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, 2020 below: (Round to the nearest dollar.) Pro Forma Income Statement Provincial Imports, Inc. for the Year Ended December 31, 2020 (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 (40%) To Retained earnings b. Prepare a pro forma balance sheet as of December 31, 2020, using the information given and the judgmental approach. Include a reconciliation of the retained earnings account. NOTE: Taxes payable for 2019 are about 20.0253% of the 2019 taxes on the income statement. The pro forma value is obtained by taking 20.0253% of the 2020 taxes. Complete the assets part of the pro forma balance sheet as of December 31, 2020: (Round to the nearest dollar.) Pro Forma Balance Sheet Provincial Imports, Inc. for the Year Ended December 31, 2020 (Judgmental Method) Cash Marketable securities 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, 2020: (Round to the nearest dollar.) $ Pro Forma Balance Sheet Provincial Imports, Inc. for the Year Ended December 31, 2020 (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 $ (Round to the nearest dollar.) i X Data Table - (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Provincial Imports, Inc. Income Statement for the Year Ended December 31, 2019 Sales revenue $4,999,000 Less: Cost of goods sold 2,753,000 Gross profits $2,246,000 Less: Operating expenses 852,000 Operating profits $1,394,000 Less: Interest expense 208,000 Net profits before taxes $1,186,000 Less: Taxes (rate = 40%) 474,400 Net profits after taxes $711,600 Less: Cash dividends 284,640 To retained earnings $426,960 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Provincial Imports, Inc. Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' Equity Cash $190,000 Accounts payable $703,000 Marketable securities 231,000 Taxes payable 95,000 Accounts receivable 633,000 Notes payable 209,000 Inventories 500,000 Other current liabilities 5,400 Total current assets $1,554,000 Total current liabilities $1,012,400 Net fixed assets 1,391,000 Long-term debt 478,600 Common stock 75,000 Retained earnings 1,379,000 Total assets $2,945,000 Total liabilities and equity $2,945,000
