Question

1a. Pro Forma Income Statement

Prepare a pro forma income statement and balance sheet for Thibodaux Inc. for 2020.

For the Pro Forma Income Statement 2020:

SALES = increase of 18.25% over 2019, 2019 Sales were $6,765,328

Gross Profit margin 60%,

There are No Preferred Stock,

OTHER EXP $1,500,000,

Depreciation $500,000,

Interest600,000,

Taxes 50%,

CS Dividend Payout Ratio 40% of NI

2020 Pro Forma IS

Thibodaux Inc.

Sales$8,000,000

CGS

Gross Profit

Other Expenses

EBDIT

DEPR

EBIT

INT

1b. Pro Forma Balance Sheet

For the Pro Forma Balance Sheet 2020: Thibodaux is at full capacity so Net fixed Assets will have to increase at the same percentage as the sales increases (use % of sales). The NFA should be larger for 2020!Look at Income Statement above for the % increase.

Due to the economy, ACP increases to 66 days and Inventory Turn-Over is reduced to 7.0.

Use the % of sales for all liabilities that are spontaneous (will increase as sales increase that is AP and Accruals). Look at IS above for the % increase.

The desired cash balance is $450,000.

Remember certain liabilities will also increase automatically (spontaneously) but some will not.Does NP & LTD increase because there was an increase in Sales? No.A firm has to make a loan or issue more bonds.The firm will do neither.

Use Income Statement from #3 for retained earnings.