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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

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.
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.
Provincial Imports Inc. Pro Forma Balance Sheet as of December 31, 2022
Assets Liabilities and stockholders' equity
Cash Accounts payable
Marketable securities $225,000 Taxes payable
Accounts receivable Notes payable $200,000
Inventories Other current liabilities
Total current assets Total current liabilities
Net fixed assets Long-term debt $500,000
Total assets Total liabilities
Common stock $75,000
Retained earnings
External funds required
Total liabilities and equity

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