Question

A firm’s pro forma balance sheet for June 2022 shows the following:

Total Assets, except for Cash and Marketable Securities, equal $1,000,000.  

Total Liabilities and Equity, except for Notes Payable, equal $1,100,000.

Assume that the firm has a $50,000 Minimum Cash Balance policy.

What should the balance in Cash and Marketable Securities equal?

	a.	$150,000
	b.	$50,000
	c.	zero
	d.	$100,000

Answer 1

A balance sheet is correct when assets value matches with the liability.

A pro-forma balance sheet is similar to the past balance sheet except it basically represents the future projections.

Here, Total Assets - Cash and Marketable Securities = $1,000,000
Total Assets = $1,000,000 + Cash and Marketable Securities ...... (1)

Total Liabilities and Equity, except for Notes Payable = $1,100,000 (Given) ......(2)

we know that Total Assets = Total Liabilities;
from equation 1 and 2,
we get,

$1,000,000 + Cash and Marketable Securities = $1,100,000
Cash and Marketable Securities = $1,100,000 - $1,000,000
Cash and Marketable Securities = $100,000

Hence, answer is option d. $100,000.