Integrative Pro forma statements Provincial Imports, Inc., has assembled last year's financial statements (income statement and...

  
 
 
 
 
 
 

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Integrative Pro forma statements Provincial Imports, Inc., has assembled last year's financial statements (income statement and balance sheet) and financial projections for use in preparing financial plans for the coming year Information related to financial projections for next year is as follows (1) Projected sales are $5,999,000 (2) Cost of goods sold last year includes $1,000,000 in fixed costs (3) Operating expense last year includes $256,000 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 $366,000 will be purchased during the year Total depreciation expense for the year will be $106.000 (10) The tax rate will remain at 40% 4 (10) The tax rate will remain at 40% 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 ** Assets Cash Marketable securities Accounts receivable Inventories Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate=40%) Net profits after taxes Less: Cash dividends To retained earnings (Click on the icon here in order to copy the contents of the data table below into a spreadsheet) Provincial Imports, Inc. Balance Sheet for the Year Just Ended Total current assets Net fixed assets Provincial Imports, Inc. Income Statement for the Year Just Ended Total assets Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses $196,000 219,000 632,000 498,000 $1,545,000 1,402,000 $5,006,000 2,748,000 $2,258,000 852,000 $1,406,000 209,000 $2,947,000 $1,197,000 478,800 $718,200 287,280 $430,920 Liabilities and Stockholders' Equity Accounts payable Taxes payable Notes payable Other current liabilities Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity $698.000 95,000 205.000 5.200 $1,003,200 493.800 73.000 1,377.000 $2,947.000 Pro Forma Income Statement Provincial Imports, Inc. for Next Year (percent-of-sales method) Sales Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less Interest expense Net profits before taxes Less: Taxes (rate=40%) Net profits after taxes Less Cash dividends (40%) To Retained earnings S S S $ L Integrative Pro forma statements Provincial Imports, Inc., has assembled last year's financial statements (income statement and balance sheet) and financial projections for use in preparing financial plans for the coming year Information related to financial projections for next year is as follows (1) Projected sales are $5,999,000 (2) Cost of goods sold last year includes $1,000,000 in fixed costs (3) Operating expense last year includes $256,000 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 $366,000 will be purchased during the year Total depreciation expense for the year will be $106.000 (10) The tax rate will remain at 40% 4 (10) The tax rate will remain at 40% 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 ** Assets Cash Marketable securities Accounts receivable Inventories Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate=40%) Net profits after taxes Less: Cash dividends To retained earnings (Click on the icon here in order to copy the contents of the data table below into a spreadsheet) Provincial Imports, Inc. Balance Sheet for the Year Just Ended Total current assets Net fixed assets Provincial Imports, Inc. Income Statement for the Year Just Ended Total assets Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses $196,000 219,000 632,000 498,000 $1,545,000 1,402,000 $5,006,000 2,748,000 $2,258,000 852,000 $1,406,000 209,000 $2,947,000 $1,197,000 478,800 $718,200 287,280 $430,920 Liabilities and Stockholders' Equity Accounts payable Taxes payable Notes payable Other current liabilities Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity $698.000 95,000 205.000 5.200 $1,003,200 493.800 73.000 1,377.000 $2,947.000 Pro Forma Income Statement Provincial Imports, Inc. for Next Year (percent-of-sales method) Sales Less: Cost of goods sold Gross profits Less: Operating expenses Operating profits Less Interest expense Net profits before taxes Less: Taxes (rate=40%) Net profits after taxes Less Cash dividends (40%) To Retained earnings S S S $ L

Answer rating: 100% (QA)

a Pro forma income statement for next year Sales revenue Projected 5999000 Cost of goods sold Fixed costs Given last year 1000000 Variable costs Projected Projected Sales Last Year Sales Last Year Var... View the full answer