Pro-forma financial statements

Spring 17

Create pro forma financial statements from the information provided below

Income Statement

Year 1

Year 1

Year 0

Year 1

Year 2

com. size

Sales revenues increase 3.2%

Revenues

17,000

100.00%

Gross margin is 42%

Cost of goods sold

9,200

SG&A decreases 1.2%

Gross profit

7,800

$2200 of PP&E is purchased on January 1,

SG&A

4,790

New PP&E is depreciated over 10 years

Depreciation

1,700

Inventory grows in line with COGS

Operating Profit

1,310

Assume that all other asset accounts grow in line with sales (3.2%).

Interest expense

155

Accounts Payable grow in line with COGS

Income before taxes

1,155

Current maturity of long-term debt declines to $100

Taxes @35%

404

Unless otherwise stated, liability accounts grow in line with sales (3.2%)

Net Income

751

Treasury Stock purchases equal $300

Average interest cost of all interest bearing debt is 1.7%

Dividends

225

Dividend payout ratio is 26%

Tax rate is 35%

Addition to retained earnings

526

Funding requirements should be financed with short-term debt

Balance Sheet

Y2

Sales revenue decline by 1.8%

Assets

Year 1

Gross margin increases to 43%

Year 0

Year 1

Year 2

com. size

Inventory grows in line with COGS

Cash and cash equivalents

640

SG&A declines by 1%

Marketable securities

28

$800of PP&E is sold on January 1 for $600 cash. (Gross =$800, Accumulated depreciation = $200)

Accounts Receivables

8,200

Annual depreciation expense declines by $ 90

Inventory

3,142

Assume that all other asset accounts grow in line with sales. (-1.8%)

Prepaid expen. & other assets

1,323

Accounts Payable grow in line with COGS

Total Current Assets

13,333

Current maturity of long-term debt remains at $100.

Unless otherwise stated, liability accounts grow in line with sales (-1.8%)

Plant property and equipment (gross)

7,607

Treasury Stock purchase is $100.

Accumulated Depreciation

3,000

Average interest cost of all interest bearing debt is 2.0%

PP&E (net)

4,607

Dividend payout ratio changes to 26%

Tax rate is 35%

Total Assets

17,940

100.00%

Funding requirements should be financed with short-term debt

Excess cash is used to retire short-term debt

Liabilities & Shareholders' Equity

Year 1

50 shares of $1 par value common stock is issued for $200.

Year 0

Year 1

Year 2

com. size

Do not add significant amounts to cash unless Loans & notes payable is drawn down to zero.

Accounts payable

3,148

Loans & notes payable (plug)

2,423

Current maturity of long-term debt

500

Accrued income taxes

1,322

Total Current Liabilities

7,393

Long-term debt

2,300

Defered income taxes

195

Shareholders' Equity

Common Stock at par

860

Capital Surplus

863

Retained earnings

6,429

Less treasury stock

(100)

Total equity

8,052

Total liabilities & shareholder equity

17,940

100.00%