Question: Using the financial statements for 2015 and 2016, information given, prepare the pro forma income statement and balance sheet for 2017. How much additional financing
Using the financial statements for 2015 and 2016, information given, prepare the pro forma income statement and balance sheet for 2017. How much additional financing will this company need?
Information for pro forma financial statements:
1)Sales are forecast to increase by 41.667% in 2017.
2)Cash on the balance sheet will equal the $25,000 minimum cash balance Warren wants maintained.
3)Additional fixed assets of $320,000 will be purchased in 2017.
4)Warren wants to issue long-term debt of $175,000 and use the proceeds to pay down notes payable.
5)Costs of Goods Sold, SG&A Expense, Accounts Receivable, Inventory, Accounts Payable, and Accruals will change in direct response to the change in sales.
6)Common stock will remain unchanged.
7)Depreciation expense will equal $75,000 for 2017.
8)Interest expense will equal $40,000 for 2017.
9)CompUs tax rate is 40%.
10)Dividends of $2,500 will be paid in March, June, September, and December.
CompU, Inc.
Comparative Balance Sheets
December 31, 2015 December 31, 2016
Cash $ 50,000 $ 10,000
Accounts Receivable 100,000 120,000
Inventory 150,000 150,000
Total Current Assets $ 300,000 $ 280,000
Fixed Assets 1,200,000 1,480,000
Less: Accumulated Depreciation (500,000) (560,000)
Total Fixed Assets $ 700,000 $ 920,000
Total Assets $1,000,000 $1,200,000
Liabilities and Stockholders Equity
Accounts Payable $ 40,000 $ 42,000
Accruals 20,000 24,000
Notes Payable 50,000 224,000
Total Current Liabilities $ 110,000 $ 290,000
Long-term debt 200,000 200,000
Common Stock 200,000 200,000
Retained Earnings 490,000 510,000
Total Liabilities and Stockholders Equity $1,000,000 $1,200,000
CompU, Inc.
Income Sheets
December 31, 2015 December 31, 2016
Sales $1,000,000 $1,200,000
Cost of Goods Sold 675,000 900,000
Gross Profit 325,000 300,000
Operating Expenses:
S, G, & A 100,000 114,000
Depreciation 50,000 60,000
Total Operating Expenses 150,000 174,000
Operating Profit 175,000 126,000
Interest Expense 25,000 39,000
Net income before taxes 150,000 87,000
Taxes 60,000 34,800
Net income after taxes 90,000 52,200
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