Choice Designs Ltd. operates a small group of wholesale/retail carpet stores in Alberta and British Columbia. The balance sheet is below:

As a result of falling profits, the directors of the business would like to completely renovate each store during June 2010 at a total cost of $300,000. However, before making such a large capital expenditure commitment, they require financial projections for the forthcoming year.
The following information is available concerning the year ending May 31, 2011:
€¢ The forecast sales for the year are $1,400,000 and the gross profit is expected to be 30% of sales. Eighty percent of all sales are on credit. At present the average collection period is six weeks but it is likely that this will change to eight weeks in the forthcoming year.
€¢ At the year-end, inventory is expected to be 25% higher than at the beginning of the year.
€¢ During the year the company intends to pay $40,000 for a fleet of delivery vans.
€¢ Administration expenses for the year are expected to be $225,000 (including $12,000 for depreciation of buildings and $38,000 for depreciation of furniture and fixtures). Selling expenses are expected to be $85,000 (including $10,000 for depreciation of delivery vans).
€¢ Ail purchases are on credit. It has been estimated that the average payment period taken will be 12 weeks during the forthcoming year.
€¢ Income taxes for the year are expected to be $34,000. Half of this will be paid during the year and the remaining half will be outstanding at the year-end.
€¢ Dividends declared and paid for the year are expected to be $0.06 per share.
€¢ There are 500,000 shares outstanding.
All calculations should be made to the nearest thousand dollars. Required:
(a) Prepare a pro forma income statement for the year ended May 31, 2011.
(b) Prepare a pro forma statement of retained earnings for the year ended May 31, 2011.
(c) Prepare a pro forma balance sheet as at May 31, 2011.

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Choice Designs Ltd Balance Sheet as at May 31, 2010 (in $ thousands) Current assets Cash Accounts receivable Inventory Total current assets 165 220 240 625 Property, plant, and equipment Land Buildings Less: Accumulated depreciation Furniture and fixtures Less: Accumulated depreciation Total property, plant, and equipment Total assets 150 350 60 450 100 140 80 560 1.185 Current liabilities Accounts payable Income taxes payable Total current liabilities 268 166 434 Shareholders' equity Common shares Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 500 251 751 1185