Question content area top

Part $1$

Pro forma balance sheet $$Peabody$$ & Peabody has

$20222022$

sales of

$ $10\mathrm{.}7$$$10\mathrm{.}7$

million. It wishes to analyze expected performance and financing needs for

$20242024$

long dash$$

$2$ years ahead. Given the following$$ information, respond to parts a$.$ and b$.$

$(1)$ The percents of sales for items that vary directly with sales are as$$ follows: Accounts$$ receivable;

$11\mathrm{.}8\%11\mathrm{.}8\%,$

$$Inventory;

$18\mathrm{.}4\%18\mathrm{.}4\%$;

Accounts$$ payable,

$13\mathrm{.}7\%13\mathrm{.}7\%$;

Net profit$$ margin,

$2\mathrm{.}9\%2\mathrm{.}9\%.$

$(2)$ Marketable securities and other current liabilities will remain unchanged.

$(3)$ Peabody desires a minimum cash balance of

$ $476$ comma $000$$$476,000.$

$(4)$ A new machine costing

$ $650$ comma $000$$$650,000$

will be acquired in

$20232023,$

and equipment costing

$ $850$ comma $000$$$850,000$

will be purchased in

$20242024.$

Total depreciation in

$20232023$

is forecast as

$ $290$ comma $000$$$290,000,$

and in

$20242024$

$ $393$ comma $000$$$393,000$

of depreciation will be taken.

$(5)$ Accruals will rise to

$ $500$ comma $000$$$500,000$

by the end of

$20242024.$

$(6)$ There will be no sale or retirement of$$ long$-$term debt.

$(7)$ No sale or repurchase of common stock is expected.

$(8)$ The dividend payout of

$50\%50\%$

of net profits will continue.

$(9)$ The sales forecast predicts

$ $11\mathrm{.}8$$$11\mathrm{.}8$

million in

$20232023$

and

$ $11\mathrm{.}8$$$11\mathrm{.}8$

million in

$20242024.$

$(10)$ The December$31,$

$20222022,$

balance sheet is here

LOADING...

$.$

a$.$ Prepare a pro forma balance sheet dated December$31,$

$20242024.$

b$.$ Discuss the financing changes suggested by the statement prepared in part

$($a$).$