PROBLEM Larsen Company makes fertlizer is a Midwestem state. The ccmpany has nearly completed a new plant that will produce twice as much as the old plant which is being x; apped. Swen Larsen, the owner, has consulted you about his finanding requirements for the coming year. He knows he will require additional financing because of the doubling production, and he intends to o'stain a loan as soon as possible. He is on good terms with local bankers and anisicipates no difflculty in obtaining the loan, but he is anxlous that the loan not to be too large or too small. The production process in the new plant is highly automated ar:' can be carried out with a work force of the same size as that used last year in the old plant. The incorne statement for last year and the yearend balance sheet are as follows. You learned that depreciation expense on the old plant was $80,000 per year, all of which was included in cost of goods sold. The new plant will be depreciated at $120,000 per year. Wages paid last year to production workers were $280,000. Materials purchases were $400,000, which is also the amount of materials cost included in Cost of Goods Sold (the beginning and ending inventories of materials were the same). Factory overhead, other than depreciation, was $280,000 last year and is expected to be $360,000 in the coming year. Selling, general, and administrative expenses are expected to be $430,000 during the coming year. Sales will be only 120% of last year's saies because it will take some tine to reach the full.output of the new plant. Larsen expects to spend $250,000 buying the new equipment to complete the new plant. This expendlure will be made as soon as he obtains the new loan. The factory will be operating at full capadty the last few months of the year, so ending requirements for current assets should be double the beginning amounts. Accounts Payable is dosely related to the amount of the inventory carrled. The company ships its products on completion so all inventory is raw materials. REQUIRED Prepare a budgeted income staterr ent for 195 and a pro forma balance sheet for December 31 , 195. State any assumptions you have in make and Indicate how much Mr. Larsen must borrow from the bank