P4-18 Pro forma balance sheet: Basic Leonard Industries wishes to prepare a pro forma balance sheet for December 31, 2020. The firm expects 2020 sales to total $3,000,000. The following information has been gathered: A minimum cash balance of $50,000 is desired. (2) Marketable securities are expected to remain unchanged. 13 Accounts receivable represent 10% of sales. (4) Inventories represent 12% of sales. (5) A new machine costing $90,000 will be acquired during 2020. Total deprecia- tion for the year will be $32,000. Accounts payable represent 14% of sales. () Accruals, other current liabilities, long-term debt, and common stock are expected to remain unchanged. (8) The firm's net profit margin is 4%, and it expects to pay out $70,000 in cash dividends during 2020. (9) The December 31, 2019, balance sheet follows. Allen Products Inc. Income Statement for the Year Ended December 31, 2019 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 25%) Net profits after taxes $937,500 421,875 $515,625 234,375 $281,250 30,000 $251,250 62,813 $188,437 P4-18 Pro forma balance sheet: Basic Leonard Industries wishes to prepare a pro forma balance sheet for December 31, 2020. The firm expects 2020 sales to total $3,000,000. The following information has been gathered: A minimum cash balance of $50,000 is desired. (2) Marketable securities are expected to remain unchanged. 13 Accounts receivable represent 10% of sales. (4) Inventories represent 12% of sales. (5) A new machine costing $90,000 will be acquired during 2020. Total deprecia- tion for the year will be $32,000. Accounts payable represent 14% of sales. () Accruals, other current liabilities, long-term debt, and common stock are expected to remain unchanged. (8) The firm's net profit margin is 4%, and it expects to pay out $70,000 in cash dividends during 2020. (9) The December 31, 2019, balance sheet follows. Allen Products Inc. Income Statement for the Year Ended December 31, 2019 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 25%) Net profits after taxes $937,500 421,875 $515,625 234,375 $281,250 30,000 $251,250 62,813 $188,437
