Integrative-Pro forma statements Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided here to prepare the financial plans. The following financial data are also available for next year: (1) The firm has estimated that its sales will be $899,800. (2) The firm expects to pay $34,800 in cash dividends. (3) The firm wishes to maintain a minimum cash balance of $31,000. (4) Accounts receivable represent approximately 19% of annual sales. (5) The firm's ending inventory will change directly with changes in sales. (6) Red Queen will purchase new machine costing $42,800 and have total depreciation of $16,000. (7) Acco (7) Accounts payable will change directly in response to changes in sales. (8) Taxes payable will equal one-fourth of the tax liability on the pro forma income statement. (9) Marketable securities, other current liabilities, long-term debt, and common stock will remain unchanged. a. Prepare a pro forma income statement for next year, using the percent-of-sales method. b. Prepare a pro forma balance sheet for next year, using the judgmental approach. c. Analyze these statements, and discuss the resulting external financing required. Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Red Queen Restaurants Income Statement for the Year Just Ended Sales revenue $799,700 Less: Cost of goods sold 600,600 Gross profits $199,100 Less: Operating expenses 99,300 $99,800 39,920 Net profits before taxes Less: Taxes (rate=40%) Net profits after taxes Less: Cash dividends $59,880 19,500 To retained earnings $40,380 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Red Queen Restaurants Balance Sheet for the Year Just Ended Liabilities and Stockholders' Equity Assets Cash $31,800 Accounts payable $99,500 Marketable securities 17,700 Taxes payable 20,900 150,000 Other current liabilities 4,100 Accounts receivable Inventories 100,900 Total current liabilities $124,500 $300,400 Long-term debt $201,200 Net fixed assets 349,900 Common stock $149,600 Retained earnings $175,000 Total assets $650,300 Total liabilities and equity $650,300 Print Done Total current assets I x a. Prepare a pro forma income statement for next year, using the percent-of-sales method. Complete the pro forma income statement for next year below: (Round to the nearest dollar. Round the percentage of sales to four decimal places.) Pro Forma Income Statement Red Queen Restaurants (percent-of-sales method) Sales $ 899800 $ % Less: Cost of goods sold Gross profits $ Less: Operating expenses % Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Cash dividends $ To Retained earnings $ b. Prepare a pro forma balance sheet, using the judgmental approach. Complete assets part of the pro forma balance sheet below: (Round to the nearest dollar.) Pro Forma Balance Sheet Red Queen Restaurants $ $ $ $ Marketable securities Accounts receivable Inventories Total current assets. Net fixed assets $ Total assets S Complete liabilities and stockholders' equity part of the pro forma balance sheet below: (Round to the nearest dollar.) Pro Forma Balance Sheet Red Queen Restaurants (Judgmental Method) Accounts payable Taxes payable Other current liabilities Total current liabilities $ $ $ $ $ $ $ Pro Forma Balance Sheet Red Queen Restaurants (Judgmental Method) Accounts payable Taxes 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.) $ $ $ $ $ $
