Question: Using the Percent-of-Sales Method complete the Proforma Income Statement and Balance Sheet. (hint) Only certain items vary directly with sales, some are fixed. PIE plans
Using the Percent-of-Sales Method complete the Proforma Income Statement
and Balance Sheet.
(hint) Only certain items vary directly with sales, some are fixed.
PIE plans on purchasing a $50,000 piece of equipment.
Does this cause a problem with the Balance Sheet?
The B/S does not balance.
Why? How could we fix it?
| PIE | |||||||||||
| Pro-forma Income Statement | |||||||||||
| For the Year Ended Dec. 31, 2019 | |||||||||||
| 2020* | 2019 | 2018 | |||||||||
| Sales | 5,104.00 | 3,850.00 | 3,432.00 | ||||||||
| Cost of Goods Sold | 4,283.93 | 3,250.00 | 2,864.00 | 84.42% | 83.45% | 83.93% | EXAMPLE | ||||
| Gross Profit | 600.00 | 568.00 | |||||||||
| Selling and G&A Expenses | 330.30 | 240.00 | |||||||||
| Fixed Expenses | 100.00 | 100.00 | |||||||||
| Depreciation Expense | 20.00 | 18.90 | |||||||||
| EBIT | 149.70 | 209.10 | |||||||||
| Interest Expense | 76.00 | 62.50 | |||||||||
| Earnings Before Taxes | 73.70 | 146.60 | |||||||||
| Taxes | 29.48 | 58.64 | |||||||||
| Net Income | 44.22 | 87.96 | |||||||||
| * Forecast | |||||||||||
| Notes: | | ||||||||||
| Tax Rate | 40% | 40% | |||||||||
| Additional Depreciation | 5.00 | ||||||||||
| Interest Rate | 0.117 | ||||||||||
| Expected dividend for 2020 | 30.00 | ||||||||||
| PIE | |||||||||||
| Pro-forma Balance Sheet | |||||||||||
| As of Dec. 31, 2019 | |||||||||||
| Assets | 2020* | 2019 | 2018 | ||||||||
| Cash and Equivalents | 52.00 | 52.00 | 57.60 | ||||||||
| Accounts Receivable | 402.00 | 351.20 | |||||||||
| Inventory | 836.00 | 715.20 | |||||||||
| Total Current Assets | 1,290.00 | 1,124.00 | |||||||||
| Plant & Equipment | 527.00 | 491.00 | |||||||||
| Accumulated Depreciation | 166.20 | 146.20 | |||||||||
| Net Fixed Assets | 360.80 | 344.80 | |||||||||
| Total Assets | 1,650.80 | 1,468.80 | |||||||||
| Liabilities and Owner's Equity | |||||||||||
| Accounts Payable | 175.20 | 145.60 | |||||||||
| Short-term Notes Payable | 225.00 | 200.00 | |||||||||
| Other Current Liabilities | 140.00 | 136.00 | |||||||||
| Total Current Liabilities | 540.20 | 481.60 | |||||||||
| Long-term Debt | 424.61 | 323.43 | |||||||||
| Total Liabilities | 964.81 | 805.03 | |||||||||
| Common Stock | 460.00 | 460.00 | |||||||||
| Retained Earnings | 225.99 | 203.77 | |||||||||
| Total Shareholder's Equity | 685.99 | 663.77 | |||||||||
| Total Liabilities and Owner's Equity | 1,650.80 | 1,468.80 | |||||||||
| Notes: | |||||||||||
| Net Addition to Plant & Equipment | 50.00 | ||||||||||
| Life of New Equipment in Years | 10 | ||||||||||
| New Depreciation (Straight Line) | 5.00 | ||||||||||
| | |||||||||||
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