Question
Peabody & Peabody has 2015 sales of $10.2 million. Itwishes to analyze expected performance and financing needs for 2017, which is-- 2 years ahead. Given
Peabody & Peabody has 2015 sales of $10.2 million. Itwishes to analyze expected performance and financing needs for 2017, which is-- 2 years ahead. Given the following information, respond to parts a and b.
(1)The percents of sales for items that vary directly with sales are as follows: Accounts receivable, 11.7%; Inventory, 17.6%; Accounts payable, 13.7%; Net profit margin, 2.7%
(2) Marketable securities and other current liabilities are expected to remain unchanged.
(3) A minimum cash balance of $483,000 is desired.
(4) A new machine costing $650,000 will be acquired in 2016, and equipment costing $848,000 will be purchased in 2017. Total depreciation in 2016 is forecast as $286,000, and in 2017 $393,000 of depreciation will be taken.
(5) Accruals are expected to rise to $501,000 by the end of 2017.
(6) No sale or retirement of long-term debt is expected.
(7) No sale or repurchase of common stock is expected.
(8) The dividend payout of 50% of net profits is expected to continue.
(9) Sales are expected to be $11.4 million in 2016 and $11.1 million in 2017.
(10) The December 31, 2015, balance sheet is here.
Balance Sheet December 31, 2015
| Assets | Liabilities and Stock Holders' Equity |
| Cash $402,000 | Accounts Payable $1,398,000 |
| Marketable securities $202,000 | Accurals $400,000 |
| Accounts Receivable $1,201,000 | Other current liabilities $80,400 |
| Inventories $1,803,000 | Total current liabilities $1,878,400 |
| Total current assets $3,608,000 | Long-term debt $2,013,600 |
| Net fixed assets $3,999,000 | Common stock $3,715,000 |
| Total assets $7,607,000 | Total liabilites and stockholders' equity $7,607,000 |
a. Prepare a pro forma balance sheet dated December 31, 2017.
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a. Prepare a pro forma balance sheet dated December 31, 2017.
Complete the assets part of the pro forma balance sheet for Peabody & Peabody for December 31, 2017 below: (Round to the nearest dollar.)
Peabody & Peabody Balance Sheet December 31, 2015 ($000)
Assets
Current Assets
Cash $?
Marketable Securities $?
Accounts receivable $?
Inventories $?
Total current assets $?
Net fixed assets $?
Total assets $?
Complete the liabilities and stockholders' equity part of the pro forma balance sheet for Peabody & Peabody for December 31, 2017 below. (Round to the nearest dollar.)
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Liabilities and stockholders' equity
Current liabilities
Accounts payable $?
Accurals $?
Other current liabilities $?
Total current liabilities $?
Long-term debt $?
Total liabilities $?
Common stock and Retained Earnings $?
External funds required $?
Total liabilities and stockholders' equity $?
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