Please use KMS Designs income statement and balance sheet to create pro forma financial statements for the upcoming year.

PLEASE COMPLETE THESE EXCEL FILES

The first step in to express the balance of an accounting item in the income statement or balance sheet as a percent of current sales revenue. Then multiply that percentage by the projected sales revenue to arrive the projected amount for an accounting item in the coming year. For example, KMS costs except depreciation were $58,413, which accounted for 78% of current years sales revenue ($58,413/$74,889 = 78%). The projected costs except depreciation for the upcoming year will be 78% x $89,866.80 (the projected sales revenue) = $70,095.60.

Some of the accounting items expressed as a percentage of sales are meaningless. This is because either the balance of the accounting item remains unchanged or its proportional change does not correspond to the percentage change in sales. We put a n.a. in the percentage column.

We assume that KMS dividend payout ratio remains unchanged for the coming year. Given the $2,776.28 dividends and net income of $6,940.70 from the income statement, we know that its dividend payout ratio is cash dividend / net income = $2,776.28/$6,940.70 = 40%. This implies that KMS retention ratio is 60%, as the sum of the dividend payout and retention ratios equals to 100%. The textbook provides the formula for the projected retained earnings. The projected retained earnings = The retained earnings from the past year + projected net income projected cash dividends to be paid Therefore, you will use the dividend payout ratio in the calculations.

You will find that the pro forma balance sheet is imbalanced as total assets are not equal to total liabilities and stockholders equity. If the projected total assets exceed projected total liabilities and stockholders equity, this indicates that external financing is needed. Please compute the needed amount from external financing.

KMS Designs Inc. Balance Sheet As of 12/31/2018 Liabilities and Stockholders' Equity Assets Sales in 2018 Percentape of Sales Percentage of Sales Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment SI1.982 14.229 14,978 $41.189 SI 982 $2.000 $13.982 $2.500 Current liabilities Acoounts payable Notes payable Total Long-term debt Stockholders' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and stockholders' equity 49,427 $65.213 8.921 $74.134 90.616 Total assets $90.616 KMS Designs Inc. Pro Forma Balance Sheet Assets Liabilities and Stockholders' Equity Projected sales in 2019 Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment Current liabilities Accounts payable Notes payable Total Long-term debt Stockholders' equity Common stock and paid in surplus Retained earnings Total Total liabilities and stockholders' equity Total assets External financing needed Income Statement Balance Sheet KMS Designs Inc. Income Statement For the year of 2018 KMS Designs Inc. Pro forma Income Statement For the vear of 2019 Percentage of Sales 74.889 58,413 16,476 5,492 10,984 Sales Costs except depreciation EBITDA Depreciation EBIT Interest expense Pretax income Income taxes (35%) Net income Dividends Addition to retained earnings Sales Costs except depreciation EBITDA Depreciation EBIT Interest expense Pretax income Income taxes (35%) Net income n.a. S306.00 306 10,678 na. na 3,737.3 6.940.7 na. 2.776.28 4,164.42 KMS Designs Inc. Balance Sheet As of 12/31/2018 Liabilities and Stockholders' Equity Assets Sales in 2018 Percentape of Sales Percentage of Sales Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment SI1.982 14.229 14,978 $41.189 SI 982 $2.000 $13.982 $2.500 Current liabilities Acoounts payable Notes payable Total Long-term debt Stockholders' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and stockholders' equity 49,427 $65.213 8.921 $74.134 90.616 Total assets $90.616 KMS Designs Inc. Pro Forma Balance Sheet Assets Liabilities and Stockholders' Equity Projected sales in 2019 Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment Current liabilities Accounts payable Notes payable Total Long-term debt Stockholders' equity Common stock and paid in surplus Retained earnings Total Total liabilities and stockholders' equity Total assets External financing needed Income Statement Balance Sheet KMS Designs Inc. Income Statement For the year of 2018 KMS Designs Inc. Pro forma Income Statement For the vear of 2019 Percentage of Sales 74.889 58,413 16,476 5,492 10,984 Sales Costs except depreciation EBITDA Depreciation EBIT Interest expense Pretax income Income taxes (35%) Net income Dividends Addition to retained earnings Sales Costs except depreciation EBITDA Depreciation EBIT Interest expense Pretax income Income taxes (35%) Net income n.a. S306.00 306 10,678 na. na 3,737.3 6.940.7 na. 2.776.28 4,164.42