Provincial Imports Inc. has assembled last year$$s financial statements $($income statement and balance sheet below$)$ and financial projections for use in preparing financial plans for the coming year.

Provincial Imports Inc. Income Statement for the Year Just Ended

Sales revenue $$5,000,000$

Less: Cost of goods sold $2,750,000$

$$Gross profits $$2,250,000$

Less: Operating expenses $850,000$

$$Operating profits $$1,400,000$

Less: Interest expense $200,000$

$$Net profits before taxes $$1,200,000$

Less:

Taxes $($rate$=21\%)252,000$

$$Net profits after taxes $ $948,000$

Less: Cash dividends $288,000$

$$To retained earnings $$660,000$

Provincial Imports Inc. Balance Sheet for the Year Just Ended

Assets Liabilities and stockholders$$ equity

Cash $ $200,000$ Accounts payable $ $700,000$

Marketable securities $225,000$ Taxes payable $95,000$

Accounts receivable $625,000$ Notes payable $200,000$

Inventories $500,000$ Other current liabilities $5,000$

Total current assets $$1,550,000$ Total current liabilities $$1,000,000$

Net fixed assets $1,400,000$ Long$-$term debt $500,000$

Total assets $$2,950,000$ Total liabilities $$1,500,000$

Common stock $75,000$

$$Retained earnings $1,375,000$

$$Total liabilities and equity $$2,950,000$

Information related to financial projections for next year is as follows:

$1.$ Projected sales are $$6,000,000.$

$2.$ Cost of goods sold last year includes $$1,000,000$ in fixed costs.

$3.$ Operating expense last year includes $$250,000$ in fixed costs.

$4.$ Interest expense will remain unchanged.

$5.$ The firm will pay cash dividends amounting to $40\%$ of net profits after taxes.

$6.$ Cash and inventories will double.

$7.$ Marketable securities$,$ notes payable, long$-$term debt, and common stock will remain unchanged.

$8.$ Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales.

$9.$ A new computer system costing $$356,000$ will be purchased during the year. Total depreciation expense for the year will be $$110,000.$

$10.$ The tax rate will remain at $21\%$ and taxes payable are $38\%$ of the tax liability on the income statement.

a$.$ Prepare a pro forma income statement for next year using the fixed cost data given to improve the accuracy of the percent$-$of$-$sales method.

b$.$ Prepare a pro forma balance sheet for next year 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 required.