Create pro forma financial statements from the information provided below
Year 1
Sales revenues increase 3.0%
Gross margin is 47%
SG&A decreases by 3.0%
$2000 of PP&E is purchased on January 1,
New PP&E is depreciated over 10 years
Inventory grows in line with COGS
Assume that all other asset accounts grow in line with sales (3.0%).
Accounts Payable grow in line with COGS
Accrued and deferred income taxes grows in line with tax expense.
Long-term debt increases by $500
Unless otherwise stated, liability accounts grow in line with sales (3.0%)
Treasury Stock purchases equal $200
Average interest cost of all interest bearing debt is 1.6%
Dividend payout ratio is 25%
Tax rate is 35%
Funding requirements should be financed with short-term debt
Y2
Sales revenue decline by 2.0%
Gross margin increases to 50%
Inventory grows in line with COGS
SG&A increases by 2%
$500 of PP&E is sold on January 1 for $500 cash. (Gross =$800, Accumulated depreciation = $300)
Annual depreciation expense declines by $ 50
Assume that all other asset accounts grow in line with sales. (-2.0%)
Accounts Payable grow in line with COGS
Long-term debt declines by $150
Accrued and deferred income taxes grows in line with tax expense.
Unless otherwise stated, liability accounts grow in line with sales (-2.0%)
Treasury Stock purchase is $250.
Average interest cost of all interest bearing debt is 1.8%
Dividend payout ratio changes to 28%
Tax rate is 35%
Funding requirements should be financed with short-term debt
Excess cash is used to retire short-term debt
100 shares of $1 par value common stock is issued for $400.
Do not add significant amounts to cash unless Loans & notes payable is drawn down to zero.

Income Statement

Year 0

Year 1

Year 2

Revenues

17,000

Cost of Goods Sold

9,200

Gross Profit

7,800

SG&A

4,790

Depreciation

1,700

Operating Profit

1,310

Interest Expense

155

Incomes Before Taxes

1,155

Taxes @35%

404

Net Income

751

Dividends

225

Additional Retaines earnings

526

BALANCE SHEET
ASSETS
	Year 0	Year 1	Year 2
Cash and Cash Equivalents	640
Markateble Securities	28
Accounts Receivables	8,200
Inventory	3,142
Prepaid Espense and other Assets	1,323
Total Current Assets	13,333
Plant Property and equipment (gross)	7,607
Accumulated Depreciation	3,000
PP&E (net)	4,607
Total Assets	17,940
Liabiilties & Shareholders' Equity
	Year 0	Year 1	Year 2
Accounts payable	3,148
Loans and notes payable (plug)	2,423
accured incoems taxes	1,322
Total Current Liabilities	6,893
Long term debt	2,800
defferd incomes taxes	195
Shared holders' Equity
Common Stock at par	860
Capital Surplus	863
Retaines earnings	6429
Less Treasury Stock	-100
Total Equity	8,052
Total Liabiities and Shareholder Equity	17,940

Statement of Retained Earnings		Year 1	Year 2
Beginning retained earnings
+Net Income
-dividends
Ending retained earnings

Statement of Cash Flow		Year 1	Year 2
Net Income
+ Depreciation
+ (increase) decrease in A.R.
+ (increase) decrease in inventory
+ (increase) decrease in prepaid exp.
+ increase (decrease) in A.P.
+ increase (decrease) in accrued taxes
+ increase (decrease) in deferred taxes
=Cash Flow from operations
+ (increase) decrease in marketable sec.
+ (increase) decrease in PPE
=Cash Flow from investing
+ increase (decrease) in loans and notes.
+ increase (decrease) in LTD
+ increase (decrease) in common stock
- dividends
- treasury stock
=Cash flow from financing
Beginning cash
+Change in cash
Ending cash