The company is planning to open another location in 2018. Prepare pro forma financials for 2018 for the new location using the following information:

Cost of leasing commercial space: $1,500 per month.

Cost of new equipment: $15,000, purchased with a long-term note. Use straight line depreciation assuming a seven-year life, no residual value. Use full year’s depreciation for the first year.

Cost of hiring and training new employees: three at $25,000 each for the first year.

Except as noted below, assets, current liabilities, sales, costs, and expenses are expected to be 80% of the existing store (from preliminary statements) except no stock. Retained earnings = net income.

Cash: $7,000. Accounts receivable amount to 4.0 turns (accounts receivable turnover will be 4.0); inventory amount to show 3.0 turns (inventory turnover will be 3.0). No stock will be issued. Retained earnings are to equal net income. Additional financing of $5,000 will be long-term. Add remaining amount needed to balance into accounts payable.

For notes to the financial statements and Management Analysis Memo, consider the following:

Peyton Approved uses the following accounting practices:

Inventory: Periodic, LIFO for both baking and merchandise

Baking supplies: $27,850 ending inventory

Equipment: Straight line method used for equipment

Business Financing Information: Use this information to calculate interest rates and insurance information, and to assess their impact on the company’s financial obligations:

6% interest note payable was made on Jan 31, 2017, and is due Feb 1, 2019.

5-year loan was made on June 1, 2016. Terms are 7.5% annual rate, interest only until due date.

Insurance: Annual policy covers 12 months, purchased in February, covering March 2017 to February 2018. No monthly adjustments have been made.

Peyton Approved
Income Statement
For Year Ended 12/31/2017
Bakery Sales				$ 327,322.55
Merchandise Sales				1,205.64
Total Revenues					328,528.19
Cost of Goods Sold - Baked				105,834.29
Cost of Goods Sold - Merchandise				859.77
Total Cost of Goods Sold					106,694.06
Gross Profit					221,834.13
Operating Expenses:
Rent Expense				24,549.19
Wages Expense				10,670.72
Misc. Supplies Expense				3,000.46
Business License Expense				2,045.77
Misc. Expense				1,538.84
Depreciation Expense				677.86
Insurance Expense				1,585.91
Advertising Expense				1,549.74
Interest Expense				818.31
Telephone Expense				490.98
Gain/Loss on disposal of equipment				100.00
Total Operating Expenses:					47,027.78
Net Income					174,806.35

Peyton Approved
Balance Sheet
As of December 31, 2017
Assets					Liabilities and Owners' Equity
	Current Assets:					Current Liabilities:
	Cash	68,520.04				Accounts Payable	23,437.11
	Accounts Receivable	68,519.91				Wages Payable	3,383.28
	Baking Supplies	18,506.70				Interest Payable	211.46
	Consignment Inventory	200.00				Customer Deposit	1,000.00
	Merchandise Inventory	1,038.07
	Prepaid Rent	2,114.55
	Prepaid Insurance	1,619.72
	Misc. Supplies	170.49
	Other Receivable - Insurance	700.00
						Total Current Liabilities		28,031.85
	Total Current Assets		161,389.48
						Long Term Liabilities:
						Notes Payable	5,000.00
	Long Term/Fixed Assets:					Total Long Term Liabilities:		5,000.00
	Baking Equipment	12,000.00
	Accumulated Depreciation	(406.44)				Total Liabilities:		33,031.85
	Net Fixed assets		11,593.56
						Common Stock	20,000.00
						Retained Earnings	119,951.19
						Total Equity		139,951.19
			172,983.04