Garlington Technologies Inc.'s 2004 financial statements are shown below. Garlington Technologies Inc.: Balance Sheet as of December 31, 2004

Suppose that in 2005 sales increase by 10 percent over 2004 sales and that 2005 dividends will increase to $112,000. Construct the pro forma financial statements using the percent of sales method. Assume the firm operated at full capacity in 2004. Use an interest rate of 13 percent on the debt balance at the beginning of the year. Assume dividends will grow by 3 percent and that the AFN will be in the form of notes payable.

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Cash Receivables Inventories Total current assets Fixed assets Total assets $ 180,000 360,000 720,000 Interest $1,260,000 1,440,000 EBT Taxes (40%) Net income Dividends $2,700,000 Sales Operating costs EBIT Accounts payable Notes payable Accruals Garlington Technologies Inc.: Income Statement for December 31, 2004 Total current liabilities Common stock Retained earnings Total liabilities and equity $3,600,000 3,279,720 $ 320,280 18,280 $ 302,000 120,800 $ 181,200 $ 108,000 $ 360,000 156,000 180,000 $ 696,000 1,800,000 204,000 $2,700,000