Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Pro Forma Income Statement and Balance Sheet Below is the income statement and balance sheet for Blue Bill Corporation for 2013. Based on the historical
| Pro Forma Income Statement and Balance Sheet | |||||||||
| Below is the income statement and balance sheet for Blue Bill Corporation for 2013. Based on the historical statements and the | |||||||||
| additional information provided, construct the firm's pro forma income statement and balance sheet for 2014. | |||||||||
| Blue Bill Corporation | |||||||||
| Income Statement | |||||||||
| For the year ended 2013 | Projected | ||||||||
| 2012 | 2013 | 2014 | |||||||
| Revenue | $60,000 | $63,000 | |||||||
| Cost of goods sold | 42,000 | 44,100 | |||||||
| Gross margin | 18,000 | 18,900 | |||||||
| SG&A expense | 6,000 | 6,300 | |||||||
| Depreciation expense | 1,800 | 2,000 | 2,200 | ||||||
| Earnings Before Interest and Taxes (EBIT) | 10,200 | 10,600 | |||||||
| Interest expense | 1,500 | 1,800 | 1,900 | ||||||
| Taxable income | 8,700 | 8,800 | |||||||
| Income Tax Expense | 3,045 | 3,080 | |||||||
| Net income | 5,655 | 5,720 | |||||||
| Dividends | 750 | 800 | 850 | ||||||
| To retained earnings | $4,905 | $4,920 | |||||||
| Additional income statement information: | |||||||||
| Sales will increase by 5% in 2014 from 2013 levels. | |||||||||
| COGS and SG&A will be the average percent of sales for the last 2 years. | |||||||||
| Depreciation expense will increase to $2,200. | |||||||||
| Interest expense will be $1,900. | |||||||||
| The tax rate is 35%. | |||||||||
| Dividend payout will increase to $850. | |||||||||
| Blue Bill Corporation | |||||||||
| Balance Sheet | |||||||||
| December 31, 2013 | Projected | ||||||||
| 2013 | 2014 | ||||||||
| Current assets | |||||||||
| Cash | $8,000 | ||||||||
| Accounts receivable | 3,150 | ||||||||
| Inventory | 9,450 | ||||||||
| Total current assets | 20,600 | ||||||||
| Property, plant, and equipment (PP&E) | 28,500 | ||||||||
| Accumulated depreciation | 16,400 | ||||||||
| Net PP&E | 12,100 | ||||||||
| Total assets | $32,700 | ||||||||
| Current liabilites | |||||||||
| Accounts payable | $3,780 | ||||||||
| Bank loan (10%) | 3,200 | ||||||||
| Other current liabilities | 1,250 | ||||||||
| Total current liabilities | 8,230 | ||||||||
| Long-term debt (12%) | 4,800 | ||||||||
| Common stock | 1,250 | ||||||||
| Retained earnings | 18,420 | ||||||||
| Total liabilities and equity | $32,700 | ||||||||
| Additional balance sheet information: | |||||||||
| The minimum cash balance is 12% of sales. | |||||||||
| Working capital accounts (accounts receivable, accounts payable, and inventory) will be the same percent of sales in 2014 as they were in 2013. | |||||||||
| $8,350 of new PP&E will be purchased in 2014. | |||||||||
| Other current liabilities will be 3% of sales in 2014. | |||||||||
| There will be no changes in the common stock or long-term debt accounts. | |||||||||
| The plug figure (the last number entered that makes the balance sheet balance) is bank loan. | |||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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