Karen Lamont is in the process of starting a new business and wants to forecast the first year's income statement and balance sheet. She has made several assumptions, which are shown below:

• Lamont has projected the firm's sales will be $1 million in the first year.
• She believes that the operating and gross profit margins will be 20 percent and 50 percent, respectively.
• For working capital, Lamont has estimated the following:
  • Accounts receivable as a percentage of sales: 12%
  • Inventory as a percentage of sales: 15%
  • Accounts payable as a percentage of sales: 7%
  • Accruals as a percentage of sales: 5%
• A bank has agreed to loan her $300,000, consisting of $100,000 in short-term debt and $200,000 in long-term debt. Both loans will have an 8 percent interest rate.
• The firm's tax rate will be 30 percent.
• Lamont will need to purchase $350,000 in plant and equipment.

Lamont will provide any other financing needed. Based on Lamont's assumptions in Situation 3, prepare a pro forma income statement and balance sheet.