It is now January 2018. The year 2017 finished well. The finalized year-end financial statements for 2017 are provided in the excel file associated with this assignment.

Randolf and Tenisa at Comfy Home would like the accountant to prepare pro-forma financial statements for 2018 based on an optimistic sales forecast. Tenisa has won the business of a large corporate client and the couple believe that Comfy Home revenues will increase by 30% in 2018 as compared with the year 2017.

Using the actual financial statements for 2017 (in the excel file with this assignment), please prepare a pro-forma balance sheet and income statement for 2018 using the percent of sales method. For any financial statement line items where no additional information is provided to indicate otherwise, assume the line item changes proportionally to sales. Note: Please use excel formulas for all calculations and do not round any intermediate steps. If you round during intermediate steps, you may get rounding errors resulting in incorrect answers.

Randolf and Tenisa provide the following additional information to the accountant to prepare the pro-forma statements:

• No new investments in furniture and fixtures or buildings and property are expected for 2018.
• Of the $540,000 in building and properties at year-end 2017, $365,000 represents buildings and $175,000 represents property (land). The buildings are being depreciated straight-line over 10 years with no salvage value.
• The furniture and fixtures are being depreciated straight-line over 15 years with no salvage value.
• The $45,000 current portion of the bank loan will be paid on December 31, 2018. Of the $255,000 in long term debt, another $45,000 comes due on December 31, 2019.
• Comfy Home does not plan to obtain any additional loans in 2018.
• The interest rate for Comfy Home’s borrowing has declined recently to 6%. It is expected to be the average rate of interest for Comfy Home short and long-term borrowings in 2018. Use total beginning borrowings to estimate the interest expense for 2018.
• Comfy Home's expected tax rate is 25%. Comfy Home has no outstanding deferred tax assets or deferred tax liabilities.
• Comfy Home is planning a $50,000 cash disbursement to its owners on 12/31/2018. No contributions to owners’ equity are foreseen.
• Comfy Home’s insurance premium covers its buildings and property as well as liability and is not expected to increase in 2018.
• Use Cash as the plug in the pro-forma financial statements.

9. What is the forecasted current portion of bank loan on Comfy Home’s 2018 pro-forma financial statements?

 

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СOMFY HOME COМPANY Balance Sheet As of December 31, 2016 Current Assets: Current Liabilities: 90,000 20,000 45,000 15,000 170,000 Cash 110,000 140,000 310,000 Accounts Payable Salaries and wages payable Current portion of bank loan 24 Accounts receivable Inventories Prepaid expenses Total Current Assets $ 25,000 585,000 Deferred revenue $ Total Current Liabilities Non-Current Assets: Non-Current Liabilities: Furniture and fixtures 120,000 450,000 Bank Loan 300,000 300,000 Buildings and property (Accumulated Depreciation S Total Non-Current Ass $ Total Non-Current Liabilities $ (154,000) 416,000 Owners' Equity: Contributed Capital 250,000 Retained earnings Total Equity Total Liabilities and Owners' 1$ 1,001,000 281,000 531,000 1,001,000 COMFY HOME COMPANY Total Assets COMFY HOME COMPANY Balance Sheet Income Statement As of December 31, 2017 For the year ending December 31, 2017 $ 1,602,000 985,000 617,000 199,000 46,000 98,000 48,000 44,000 182,000 30,000 33,000 Current Assets: Current Liabilities: Total Revenue Cash 196,000 Cost of Goods Solc $ 143,000 178,000 358,000 Accounts Payable Salaries and wages payable Current portion of bank loan Deferred revenue 2$ Accounts receivable 2$ 24 30,000 Gross Profit 45,000 Salaries and wages $ 18,000 Marketing expense $ $ Inventories Prepaid expenses Total Current Assets $ 33,000 712,000 $ Total Current Liabilities $ 289,000 Selling, General, ai $ Insurance expense $ Depreciation exper $ Non-Current Assets: Non-Current Liabilities: 255,000 Operating Profit $ 255,000 Interest expense Furniture and fixtures 150,000 540,000 (198,000) 492,000 Bank Loan Total Non-Current Liabilities $ Buildings and property (Accumulated Depreciation S Total Non-Current Ass S Тахes Owners' Equity: Net Income $ 119,000 Contributed Capital Retained earnings 260,000 $ 400,000 Total Equity Total Liabilities and Owners' 1 $ 1,204,000 $ 660,000 Total Assets 1,204,000 СOMFY HOME COМPANY Balance Sheet As of December 31, 2016 Current Assets: Current Liabilities: 90,000 20,000 45,000 15,000 170,000 Cash 110,000 140,000 310,000 Accounts Payable Salaries and wages payable Current portion of bank loan 24 Accounts receivable Inventories Prepaid expenses Total Current Assets $ 25,000 585,000 Deferred revenue $ Total Current Liabilities Non-Current Assets: Non-Current Liabilities: Furniture and fixtures 120,000 450,000 Bank Loan 300,000 300,000 Buildings and property (Accumulated Depreciation S Total Non-Current Ass $ Total Non-Current Liabilities $ (154,000) 416,000 Owners' Equity: Contributed Capital 250,000 Retained earnings Total Equity Total Liabilities and Owners' 1$ 1,001,000 281,000 531,000 1,001,000 COMFY HOME COMPANY Total Assets COMFY HOME COMPANY Balance Sheet Income Statement As of December 31, 2017 For the year ending December 31, 2017 $ 1,602,000 985,000 617,000 199,000 46,000 98,000 48,000 44,000 182,000 30,000 33,000 Current Assets: Current Liabilities: Total Revenue Cash 196,000 Cost of Goods Solc $ 143,000 178,000 358,000 Accounts Payable Salaries and wages payable Current portion of bank loan Deferred revenue 2$ Accounts receivable 2$ 24 30,000 Gross Profit 45,000 Salaries and wages $ 18,000 Marketing expense $ $ Inventories Prepaid expenses Total Current Assets $ 33,000 712,000 $ Total Current Liabilities $ 289,000 Selling, General, ai $ Insurance expense $ Depreciation exper $ Non-Current Assets: Non-Current Liabilities: 255,000 Operating Profit $ 255,000 Interest expense Furniture and fixtures 150,000 540,000 (198,000) 492,000 Bank Loan Total Non-Current Liabilities $ Buildings and property (Accumulated Depreciation S Total Non-Current Ass S Тахes Owners' Equity: Net Income $ 119,000 Contributed Capital Retained earnings 260,000 $ 400,000 Total Equity Total Liabilities and Owners' 1 $ 1,204,000 $ 660,000 Total Assets 1,204,000

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