Hi, I have a question about a pro-forma balance sheet. Requirements for the balance sheet, fixed asset part are: "Fixed assets are being operated at 100% of capacity". It doesn't say if they grow or remain constant or if they depend on sales. No other information is specified. Fixed assets for the previous year were 184,735, and depreciation was 21,950. I'm thinking that the projected fixed assets are either again 184,735, OR 184,735 minus depreciation for a period, and it will be 162,785. What is the correct way to project fixed assets in this case? Thank you. Please find the whole problem below.

Using the financial statements for 2009 as your 'base', assume that Luxio's sales are 20% higher for 2010.Use this projection to prepare the pro forma statements following the requirements listed below.Assume the change in sales is permanent.

For the Income Statement:

Cost of Goods Sold rate is expected to remain constant;

'Depreciation' and 'Interest paid' expenses are expected not to change;

The Tax rate is expected to decrease to 32%; and

Management is expected to increase the amount of dividends paid by 5% (therefore, the Dividend payout rate will increase by 5%).

For the Balance Sheet:

'Current assets' change in direct proportion to sales;

'Fixed assets' are being operated at 100% of capacity;

'Accounts payable' changes in direct proportion to sales;

'Notes payable' and 'Other' current liabilities do not change;

'Common stock' remains unchanged; and

Use 'Long-term debt' as the plug variable.

Determine the amount of External Financing Needed (EFN) under the pro forma assumptions.Detail how this external financing is distributed

LUXIO GOLF CORP. 2009 Income Statement

Sales $ 285,760.00

Cost of Goods Sold 205,132.00

Depreciation 21,950.00

Earnings Before Interest and Tax $58,678.00

Interest Paid 9,875.00

Taxable Income $48,803.00

Taxes (35%) 17,081.05

Net Income $31,721.95

Dividends $ 18,000.00

Addition to Retained Earnings 13,721.95

LUXIO GOLF CORP. 2009 Balance Sheets

2008 2009

Assets

Current Assets

Cash $18,270.00 $22,150.00

Accounts Receivable12,315.0013,865.00

Inventory21,584.0024,876.00

Total Current Assets$52,169.00$60,891.00

Fixed Assets

Net Plant and Equipment$ 168,326.00$ 184,735.00

Total Assets$ 220,495.00$ 245,626.00

Current liabilities

Accounts Payable $16,215.00 $17,318.00

Notes Payable 8,000.00 10,000.00

Other 11,145.00 14,451.00

Total $35,360.00 $41,769.00

Long-term Debt $80,000.00 $85,000.00

Owner's Equity

Common Stock and paid in $20,000.00 $20,000.00

Retained Earnings 85,135.00 98,857.00

Total $ 105,135.00 $ 118,857.00

Total Liabilities and Owner's Equity $ 220,495.00 $ 245,626.00