Pro forma balance sheet Peabody & Peabody has

20192019

sales of

$ 10.8$10.8

million. It wishes to analyze expected performance and financing needs for

20212021long dash2

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;

11.9 %11.9% ,

Inventory;

18.4 %18.4% ;

Accounts payable,

13.7 %13.7% ;

Net profit margin,

3.4 %3.4%.

(2) Marketable securities and other current liabilities are expected to remain unchanged.

(3) A minimum cash balance of

$ 482 comma 000$482,000

is desired.

(4) A new machine costing

$ 650 comma 000$650,000

will be acquired in

20202020 ,

and equipment costing

$ 854 comma 000$854,000

will be purchased in

20212021.

Total depreciation in

20202020

is forecast as

$ 286 comma 000$286,000 ,

and in

20212021

$ 387 comma 000$387,000

of depreciation will be taken.

(5) Accruals are expected to rise to

$ 503 comma 000$503,000

by the end of

20212021.

(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 %50%

of net profits is expected to continue.

(9) Sales are expected to be

$ 12.0$12.0

million in

20202020

and

$ 11.7$11.7

million in

20212021.

(10) The December 31,

20192019 ,

balance sheet is here

LOADING...

.

a. Prepare a pro forma balance sheet dated December 31,

20212021.

b. Discuss the financing changes suggested by the statement prepared in part

(a ).

Leonard Industries Balance Sheet December 31, 20192019

Assets

Liabilities and Stockholders' Equity

Cash

$ 405 comma 000$405,000

Accounts payable

$ 1 comma 398 comma 000$1,398,000

Marketable securities

195 comma 000195,000

Accruals

395 comma 000395,000

Accounts receivable

1 comma 197 comma 0001,197,000

Other current liabilities

80 comma 30080,300

Inventories

1 comma 799 comma 0001,799,000

Total current liabilities

$ 1 comma 873 comma 300$1,873,300

Total current assets

$ 3 comma 596 comma 000$3,596,000

Long-term debt

1 comma 998 comma 7001,998,700

Net fixed assets

3 comma 996 comma 0003,996,000

Common stock

3 comma 720 comma 0003,720,000

Total assets

Modifying $ 7 comma 592 comma 000 with double underline $7,592,000

Total liabilities and

stockholders' equity

Modifying $ 7 comma 592 comma 000 with double underline $7,592,000