. Pro-forma Statements The 2020 Income Statement and Balance Sheet for Longview Products, Inc. (LPI) are shown below.

Longview Products, Inc. Income Statement For the Year Ended December 31, 2020 Sales revenue 6,000,000$ Less: Cost of Goods Sold 3,300,000$ Gross Profits 2,700,000$ Less: Operating Expenses 1,000,000$ Operating Profits (EBIT) 1,700,000$ Less: Interest Expense 95,000$ Net profits before taxes 1,605,000$ Less: Taxes @ 21% 337,050$ Net profits after taxes 1,267,950$ Less: Cash dividends 300,000$ To retained earnings 967,950$

Longview Products, Inc. Balance Sheet 31-Dec-20 Assets Liabilities and Stockholders' Equity Cash 250,000$ Accounts Payable 600,000$ Marketable Securities 200,000$ Taxes Payable 100,000$ Accounts Receivable 600,000$ Notes Payable 250,000$ Inventories 550,000$ Total current liabilities 950,000$ Total current assets 1,600,000$ Long-term debt 700,000$ Net fixed assets 1,400,000$ Total liabilities 1,650,000$ Total assets 3,000,000$ Common stock 100,000$ Retained earnings 1,250,000$ Total Liabilities and Stockholders' Equity 3,000,000$

For 2021, the following information is likely: 1. Projected sales are $6,500,000 2. Cost of goods sold in 2019 includes $1,150,000 in fixed costs 3. Operating expense in 2019 includes 400,000 in fixed costs 4. Interest expense will increase to $120,000 5. LPI will pay cash dividends of 40% of net profits after taxes 6. Marketable securities will increase to $500,000; notes payable will decrease to $50,000; while long-term debt and common stock will remain unchanged 7. Cash, inventories, accounts receivable, and accounts payable will change in direct response to the change in sales

8. Manufacturing equipment costing $600,000 will be purchased during the year 9. Total depreciation expense for the year will be $250,000 10. A 21% tax rate will apply a. Prepare a pro forma income statement for the year ending December 31, 2021 using the fixed cost data given to improve the accuracy of the percent-of-sales method b. Prepare a pro-forma balance sheet as of December 31, 2021, using the information given and the judgmental approach. Include a reconciliation of the retained earnings account. c. Analyze these statements and discuss the resulting external financing needed, if any.

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