Horrock's Inc. is a small engineering corporation that survevs land for development. The company has grown rapidly over the past few years, and management has to decide whether new engineers should be hired and new offices opened. To assess future growth, the company's accountant has gathered budgeted information for the coming year, 2000 .

Ending common stock balance. . . . . . . . . . . . . $\$ 48,000$

Beginning retained earnings balance . . . . . . . . 34,000 Ending accounts payable balance. . . . . . . . . . . 6,000 Ending equipment balance. . . . . . . . . . . . . . . . 159,000 Ending accumulated depreciation balance .... 24,000 Ending accounts receivable balance. . . . . . . . . 19,500 Ending cash balance . . . . . . . . . . . . . . . . . . . 18,000 Interest expense. . . . . . . . . . . . . . . . . . . . . 3,000 Salary expense . . . . . . . . . . . . . . . . . . . . . . 105,000 Other expenses (including depreciation). . . . . . 37,500 Service revenue . . . . . . . . . . . . . . . . . . . . . . 300,000 Income tax rate . . . . . . . . . . . . . . . . . . . . . . $33 \%$

Income taxes due on the coming year's net income will be paid during 2001. Dividends of $\$ 70,000$ are to be declared and paid during 2000 .

1. Prepare a pro-forma income statement and balance sheet for 2000 from which the company president can make expansion decisions.

2. Interpretive Question: On the basis of this information, is the company very profitable? How should this level of profits affect its expansion plans?