Stevens Textile’s 2007 financial statements are shown below.
Stevens Textile: Balance Sheet as of December 31, 2007 (Thousands of Dollars)

Suppose 2008 sales are projected to increase by 15% over 2007 sales. Determine the additional funds needed. Assume that the company was operating at full capacity in 2007, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Use the forecasted financial statements method to develop a pro forma balance sheet and income statement for December 31, 2008. Use an interest rate of 10% on the balance of debt at the beginning of the year to compute interest (cash pays no interest). Use the pro forma income statement to determine the addition to retained earnings.

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Cash Receivables Inventories $ 1,080 Accounts payable 6,480 Accruals 9,000 $16,560 12,600 $ 4,320 2,880 2,100 $ 9,300 Mortgage bonds 3,500 Common stock 3,500 Retained earnings 12,860 Total assets $29,160 Total liabilities and equity $29,160 Stevens Textile: Income Statement for December 31, 2007 (Thousands of Dollars) Total current assets Net fixed assets Notes payable Total current liabilities Sales Operating costs Earnings before interest and taxes Interest Earnings before taxes Taxes (40%) Net income Dividends (45%) Addition to retained earnings $36,000 32,440 $ 3,560 460 $ 3,100 1,240 $ 1,860 $837 $ 1,023