Question
Prepare a pro forma income statement for the year ending December 31, 2013, using the provided fixed cost data to improve the accuracy of the
Prepare a pro forma income statement for the year ending December 31, 2013, using the provided fixed cost data to improve the accuracy of the percentage of sales method.
Prepare a pro forma balance sheet as of December 31, 2013, using the provided information and the critical method. Include a retained earnings adjustment account.
Analyze these financial statements and comment on the resulting external financing requirements.
Data:
Projected sales are $6,000,000.
Cost of goods sold in 2012 includes $1,000,000 in fixed costs.
Operating expenses in 2012 include $250,000 in fixed costs.
Interest expenses remain unchanged.
The company will pay cash dividends equal to 40% of net profits after taxes.
Inventories and cash will double.
Marketable securities, accounts payable, long-term debt, and common stock will remain unchanged.
Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales.
A new computer system will be purchased during the year at a cost of $356,000. Total depreciation expenses for the year will be $110,000.
The tax rate will remain at 40%.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started