IntegrativeProforma statementsProvincial Imports, Inc., has assembled last year's financial statements (income statement and balance sheet 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 $6,006,000.

(2) Cost of goods sold last year includes $1,009,000 in fixed costs.

(3) Operating expense last year includes$244,000in 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 $356,000 will be purchased during the year. Total depreciation expense for the year will be $115,000.

(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.

for the Year Ended December 31, 2019
Sales revenue	$4,999,000
Less: Cost of goods sold	2749000
Gross profits	$2,250,000
Less: Operating expenses	858000
Operating profits	$1,392,000
Less: Interest expense	190000
Net profits before taxes	$1,202,000
Less: Taxes (rate=40%)	480800
Net profits after taxes	$721,200
Less: Cash dividends	252420
To retained earnings	$468,780

Assets Cash Marketable securities Accounts receivable Inventories Total current assets Net fixed assets Provincial Imports, Inc. Balance Sheet for the Year Just Ended Liabilities and Stockholders' Equity $210,000 Accounts payable $690,000 219,000 Taxes payable 95,000 619,000 Notes payable 200,000 505,000 Other current liabilities 5,200 $1,553,000 Total current liabilities $990,200 1,391,000 Long-term debt 512,800 Common stock 70,000 Retained earnings 1,371,000 $2,944,000 Total liabilities and equity $2,944,000 Total assets Print Done