The financial statements for the year ended June 30, 2017, are given below for Morgan Construction Company.
Question:
The financial statements for the year ended June 30, 2017, are given below for Morgan Construction Company. The firm’s sales are projected to grow at a rate of 25 percent next year, and all financial statement accounts will vary directly with sales. Based on that projection, develop a pro forma balance sheet and an income statement for the 2018 fiscal year.
Financial StatementsFinancial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Morgan Construction Company Balance Sheet as of June 30, 2017 Liabilities and Stockholders' Assets: Equity: $ 3,349,239 Accounts payable $ 9,041,679 5,830,754 Notes payable Cash Accounts 4,857,496 receivable 22,267,674 Total current Inventories $13,899,175 liabilities $31,447,667 Long-term debt Total current 29,731,406 assets Net fixed assets 43,362,482 Common stock 19,987,500 Other assets 1,748,906 Retained earnings 12,940,974 Total assets $76,559,055 Total liabilities $76,559,055 and equity Morgan Construction Company Income Statement for the Fiscal Year Ended June 30, 2017 Net sales $193,212,500 Costs 45,265,625 $ 47,946,875 EBITDA Depreciation 23,318,750 $ 24,628,125 11,935,869 $ 12,692,256 EBIT Interest EBT Taxes (35%) 4,442,290 $ 8,249,966 Net income
Step by Step Answer:
Morgan Construction Company x Pro Forma Balance Sheet for Year Ended June 30 2017 2018 2017 2...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-1119371403
4th edition
Authors: Robert Parrino, David S. Kidwell, Thomas Bates
Related Video
Depreciation of non-current assets is the process of allocating the cost of the asset over its useful life. The cost of the asset includes the purchase price, any additional costs incurred to bring the asset to its current condition and location, and any other costs that are directly attributable to the asset. The useful life of the asset is the period over which the asset is expected to be used by the company. To calculate the depreciation, companies use different methods such as straight-line, declining-balance, sum-of-the-years\'-digits, units-of-production, and group depreciation. The chosen method will depend on the type of asset, the company\'s accounting policies, and the accounting standards that are applicable. The straight-line method allocates an equal amount of the asset\'s cost over its useful life, while the declining-balance method calculates depreciation at a fixed rate, typically double the straight-line rate, but the amount of depreciation decreases over time. The sum-of-the-years\'-digits method is similar to the declining-balance method, but the rate of depreciation is calculated using a fraction that is based on the useful life of the asset. It\'s important to note that the depreciation expense will be recorded on the company\'s income statement and the accumulated depreciation will be recorded on the company\'s balance sheet. This will decrease the value of the asset on the balance sheet over time.
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