Q1) Using the 2012 financial statements for DRE Corporation and this additional information, prepare a pro forma income statement and balance sheet for the year 2013. Determine the discretionary financing needed (DFN) and assume that if the DFN is positive, the company will increase long-term debt, and if DFN is negative, the company will pay back some long-term debt.

Sales for next year (2013) are expected to increase by $300,000 to $1,800,000. The firm is running efficiently and at full capacity so that all assets and spontaneous liabilities are expected to increase proportionally with sales. The dividend payout ratio for 2013 will be 40%.

DRE Corporation 2012 Financial Statements

Income Statement ($)

Sales

1,500,000

Net Income

250,000

Balance Sheet ($)

Cash

400,000

Accounts Receivable

450,000

Inventory

350,000

Property, Plant, & Equipment

650,000

Total Assets

1,850,000

Accounts Payable

200,000

Short Term Notes Payable

250,000

Long-term Debt

550,000

Common Stock

200,000

Retained Earnings

650,000

Total Liabilities and Equity

1,850,000