Randy & Whiskers Enterprises has 2021 sales of $15.5 million. It wishes to analyze expected performance and

Question:

Randy & Whiskers Enterprises has 2021 sales of $15.5 million. It wishes to analyze expected performance and financing needs for 2022.

You are requested to compile a pro forma balance sheet. Given the following information, respond to parts a and b.

(1) The balance sheet items vary directly with sales: accounts receivable (10%), inventory

(15%), accounts payable (10%), and net profit margin (2%).

(2) Marketable securities and other current liabilities are expected to remain unchanged.

(3) A minimum cash balance of $520,000 is desired.

(4) A new equipment costing $20,000 will be purchased during 2022, and a total depreciation in 2022 is forecast at $5,000.

(5) Accruals are expected to rise to $660,000.

(6) No sale or retirement of long-term debt is expected, and no common stock will be repurchased.

(7) The dividend payout of 50% of net profits is expected to continue.

(8) Sales are expected to decrease to $15,000,000.

(9) The December 31, 2021, balance sheet follows.

Based on the information provided, answer the following:

a. Prepare a pro forma balance sheet dated December 31, 2022.

b. Discuss the financing changes suggested by the statement prepared in part a.

image text in transcribed

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Principles Of Managerial Finance

ISBN: 9781292400648

16th Global Edition

Authors: Chad Zutter, Scott Smart

Question Posted: