Proforma Financial Statements for Stevens Textiles

This problem requires creating a pro-formabalance sheetto come up with the answers. I have placed the answers from the back of the book in the spreadsheet, but I don't know how to come up with them (i.e. create the sheet).

Stevens Textile's 2004financial statementsare shown below.

Stevens Textile's: Balance sheet as of December 31, 2004

(Thousands of Dollars)

Cash $1,080 Accounts Payable $4,320

Receivables $6,480 Accrurals $2,880

Inventories $9,000 Notes Payable $2,100

Total current assets $16,560 Total current liabilities $9,300

Net fixed assets $12,600 Mortgage bonds $3,500

Common stock $3,500

Total assets $29,160 Retained earnings $12,860

Totalliabilitiesand equity $29,160

Stevens Textile's:Income Statementas of December 31, 2004

(Thousands of Dollars)

Sales $36,000

Operating Costs $32,440

Earnings before Interest $3,560

Interest $460

Earnings before taxes $3,100

Taxes $1,240

Net Income $1,860

Dividends $837

Addition to retained earnings $1,023

Suppose 2005salesare projected to increase by 15 percent over 2004 sales. Determine the additional funds needed.

Assume that the company was operating at full capacity in 2004, that it cannot sell off any of its fixt assets, and that any

required financing will be borrowed asnotes payable. Also, assume that assets, spontaneous liabilities, and operating costs are

expected to increase by the same percentage as sales. Use the percent of sales method to develop a pro forma balance sheet

and income statement for December 31, 2005. Use an interest rate of 10 percent on the balance debt at the beginning of the year

to compute interest (cashpays no interest). Use the pro forma income statement to determine the addition toretained earnings.