Using the financial statements for 2015 and 2016, information given, prepare the pro forma income statement and balance sheet for 2017. How much additional financing will this company need?

Information for pro forma financial statements:

1)Sales are forecast to increase by 41.667% in 2017.

2)Cash on the balance sheet will equal the $25,000 minimum cash balance Warren wants maintained.

3)Additional fixed assets of $320,000 will be purchased in 2017.

4)Warren wants to issue long-term debt of $175,000 and use the proceeds to pay down notes payable.

5)Costs of Goods Sold, SG&A Expense, Accounts Receivable, Inventory, Accounts Payable, and Accruals will change in direct response to the change in sales.

6)Common stock will remain unchanged.

7)Depreciation expense will equal $75,000 for 2017.

8)Interest expense will equal $40,000 for 2017.

9)CompUs tax rate is 40%.

10)Dividends of $2,500 will be paid in March, June, September, and December.

CompU, Inc.

Comparative Balance Sheets

December 31, 2015 December 31, 2016

Cash $ 50,000 $ 10,000

Accounts Receivable 100,000 120,000

Inventory 150,000 150,000

Total Current Assets $ 300,000 $ 280,000

Fixed Assets 1,200,000 1,480,000

Less: Accumulated Depreciation (500,000) (560,000)

Total Fixed Assets $ 700,000 $ 920,000

Total Assets $1,000,000 $1,200,000

Liabilities and Stockholders Equity

Accounts Payable $ 40,000 $ 42,000

Accruals 20,000 24,000

Notes Payable 50,000 224,000

Total Current Liabilities $ 110,000 $ 290,000

Long-term debt 200,000 200,000

Common Stock 200,000 200,000

Retained Earnings 490,000 510,000

Total Liabilities and Stockholders Equity $1,000,000 $1,200,000

CompU, Inc.

Income Sheets

December 31, 2015 December 31, 2016

Sales $1,000,000 $1,200,000

Cost of Goods Sold 675,000 900,000

Gross Profit 325,000 300,000

Operating Expenses:

S, G, & A 100,000 114,000

Depreciation 50,000 60,000

Total Operating Expenses 150,000 174,000

Operating Profit 175,000 126,000

Interest Expense 25,000 39,000

Net income before taxes 150,000 87,000

Taxes 60,000 34,800

Net income after taxes 90,000 52,200