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Pro forma balance sheet-Basic Leonard Industries wishes to prepare a pro forma balance sheet for next year. The firm expects sales to total $3,000,000. The following information has been gathered. (1) A minimum cash balance of $49,500 is desired. (2) Marketable securities will remain unchanged. (3) Accounts receivable represent 9.6% of sales. (4) Inventories represent 11.6% of sales. (5) Leonard will acquire a new machine costing $90,400. Total depreciation for the year will be $31,900. (6) Accounts payable represent 14.1% of sales. (7) Accruals, other current liabilities, long-term debt, and common stock will remain unchanged. (8) The firm's net profit margin is 4.4%, and it expects to pay out $69,800 in cash dividends next year. (9) The most recent balance sheet follows a. Use the judgmental approach to prepare a pro forma balance sheet for next year. b. How much, if any, additional financing will Leonard Industries require? Discuss. c. Could Leonard Industries adjust its planned dividend to avoid the situation described in part b? Explain how. 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 Leonard Industries below: (Round to the nearest dollar.) Pro Forma Balance Sheet Leonard Industries Liabilities and stockholders' equity Current liabilities Accounts payable Accruals Other current liabilities Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total stockholders' equity External funds required Total liabilities and stockholders' equity How much, if any, additional financing will Leonard Industries require? Discuss. (Select all the answers that apply.) A. Based on the forecast and desired level of certain accounts, the financial manager should arrange for credit of $14,500. B. If financing cannot be obtained, one or more of the constraints must be changed. C. Leonard Industries' retained earnings are enough to cover all of the company's desired level of certain accounts. D. Based on the forecast and desired level of certain accounts, the financial manager should arrange for credit of $19,500. Could Leonard Industries adjust its planned dividend to avoid the situation described in part b? Explain how. (Select all the answers that apply.) A. If Leonard Industries reduced its dividend to $55,300 or less, the firm would not need any additional financing. B. By reducing the dividend, more cash is retained by the firm to cover the growth in other asset accounts. C. Leonard Industries' retained earnings are enough to cover all of the company's desired level of certain accounts including dividends. D. If Leonard Industries reduced its dividend to $60,300 or less, the firm would not need any additional financing. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.)
