1. Develop a pro forma income statement and balance sheet for the White & Pinkman Corporation. The company’s 2018 financial statements are shown below. Base your forecast on the financial statements and the following assumptions: • Sales growth is predicted to be 20 percent in 2019. • Cost of goods sold, selling and administrative expense, all current assets, accounts payable, and accrued expenses will remain the same percentage of sales as in 2018.
• Depreciation expense, interest expense, gross plant and equipment, notes payable, long-term debt, and equity accounts other than retained earnings in 2019 will be the same as in 2018.
• The company’s tax rate in 2019 will be 40 percent. • The same dollar amount of dividends will be paid to common stockholders in 2019 as in 2018.
• Bad debt allowance in 2019 will be the same percentage of accounts receivable as it was in 2018

2. a. Calculate White & Pinkman’s additional funds needed, or excess financing. If additional funds are needed, add them to long-term debt to bring the balance sheet into balance. If excess financing is available, increase common stock dividends paid (and, therefore, decrease 2019 retained earnings) until the balance sheet is in balance.

 

White & Pinkman Corporation Income Statement for 2018 Sales Cost of Goods Sold Gross Profit Selling and Administrative Expenses Depreciation Expense Earnings before Interest and Taxes (EBIT) Interest Expense Earnings before Taxes (EBT) Taxes (40%) Net Income (NI) Earnings per Share (EPS) (1 million shares) Common Stock Dividends Paid Addition to Retained Earnings $ 10,000,000 4,000,000 6,000,000 800,000 2,000,000 3,200,000 1,350,000 1,850,000 740,000 1,110,000 1.11 400,000 710,000