P2 Integrative: Pro forma statements. Provincial Imports Inc. has assembled past (2021) financial statements (income statement and balance sheet below) and financial projections for use in preparing financial plans for the coming year (2022).
	Provincial Imports Inc. Income Statement for the Year Ended December 31, 2021
	Sales Revenue			$5,000,000
	Less: Cost of goods sold			2,750,000
	Gross profits			$2,250,000
	Less: Operating expenses			850,000
	Operating profits			$1,400,000
	Less: Interest expense			200,000
	Net profits before taxes			$1,200,000
	Less: Taxes (rate = 21%)			252,000
	Net profits after taxes			$948,000
	Less: Cash dividends			288,000
	To retained earnings			$660,000
	Provincial Imports Inc. Balance Sheet December 31, 2021
	Assets				Liabilities and stockholders' equity
	Cash		$200,000		Accounts payable			$700,000
	Marketable securities		225,000		Taxes payable			95,000
	Accounts receivable		625,000		Notes payable			200,000
	Inventories		500,000		Other current liabilities			5,000
	Total current assets		$1,550,000		Total current liabilities			$1,000,000
	Net fixed assets		1,400,000		Long-term debt			500,000
	Total assets		$2,950,000		Total liabilities			$1,500,000
					Common stock			75,000
					Retained earnings			1,375,000
					Total liabilities and equity			$2,950,000
Information related to financial projections for the year 2022 is as follows:
(1) Projected sales are $6,000,000.
(2) Cost of goods sold in 2021 includes $1,000,000 in fixed costs.
(3) Operating expense in 2021 includes $250,000 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 $356,000 will be purchased during the year. Total depreciation expense for the year will be $110,000.
(10) The tax rate will remain at 21%.
a.	Prepare a pro forma income statement for the year ended December 31, 2022, 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, 2022, 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.
Answer - fill in the blue boxes below.
a.	Prepare a pro forma income statement for the year ended December 31, 2022, using the fixed cost data given to improve the accuracy of the percent-of-sales method.
	Provincial Imports Inc. Pro Forma Income Statement for the Year Ended December 31, 2022
	Sales					$6,000,000
	Less: Cost of goods sold
	Gross profits
	Less: Operating expenses
	Operating profits
	Less: Interest expense
	Net profits before taxes
	Less: Taxes (rate = 21%)
	Net profits after taxes
	Less: Cash dividends
	To retained earnings