Pro forma balance sheet Peabody & Peabody has 2022 sales of $10.6 million. It wishes to analyze expected performance and financing needs for 2024

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; 11.8%, Inventory; 18.5%; Accounts payable, 14.1%; Net profit margin, 3.4%.

(2) Marketable securities and other current liabilities will remain unchanged.

(3) Peabody desires a minimum cash balance of $478,000.

(4) A new machine costing $651,000 will be acquired in 2023, and equipment costing $845,000 will be purchased in 2024. Total depreciation in 2023 is forecast as $294,000, and in 2024 $388,000 of depreciation will be taken.

(5) Accruals will rise to $504,000 by the end of 2024.

(6) There will be no sale or retirement of long-term debt.

(7) No sale or repurchase of common stock is expected.

(8) The dividend payout of 50% of net profits will continue.

(9) The sales forecast predicts $11.7 million in 2023 and $11.5 million in 2024.

(10) The December 31, 2022, balance sheet is here

a. Prepare a pro forma balance sheet dated December 31, 2024.

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

Peabody & Peabody Balance Sheet December 31, 2022 Assets Liabilities and Stockholders' Equity Cash $405,000 Accounts payable Marketable securities 205,000 Accruals Accounts receivable 1,197,000 Other current liabilities Inventories 1,796,000 Total current liabilities Total current assets $3,603,000 Long-term debt Net fixed assets 4,003,000 Common stock Total liabilities and Total assets $7,606,000 stockholders' equity $1,405,000 398,000 79,800 $1,882,800 2,000,200 3,723,000 $7,606,000