Question

XYZ Corporation published the following information in its financial statements for its 2018 annual report:

      Income Statement Items:
 
 
Sales                                        
$76,000
 
- Cost of goods sold
  49,000
 
Gross profit
 
  27,000
- Cash Operating expenses
$9,000
 
- Depreciation
  2,000
 
       Total Operating Expenses
 
  11,000
EBIT
 
  16,000
- Interest expense
 
       840
EBT
 
  15,160
- Income tax expense
 
    5,306
Net Income
 
  $9,854

 

    Balance Sheet Items:
 
Cash                               
  $9,000
Marketable securities
    2,000
Accounts receivable
  11,000
Inventories
    7,000
Fixed Assets, net
  24,000
  Total Assets
$53,000
 
 
 Accounts payable
  $8,000 
 Accrued payables
    3,000
 Bonds payable
  12,000 
 Common stock
  16,000 
 Retained earnings
  14,000 
   Total Liabilities and Equity 
$53,000 

 

Sales in 2019 are estimated to be $90,000.

$5,000 of the cash operating expenses for 2018 are considered variable costs, and the remainder are fixed costs.

Depreciation and the remainder of cash operating expenses are considered to be fixed costs.

Cash, accounts receivable, inventories, accounts payable, and accrued payables are considered to be spontaneous items.

Marketable securities, net fixed assets, bonds payable, and common stock are discretionary.

$5,000 of bonds payable at the end of 2018 are considered "current liabilities," and will be repaid on January 1, 2019. The interest rate on the bonds for 2019 will remain the same as it was in 2018.

The company will purchase fixed assets of $3,600 in 2019, but overall depreciation for 2019 will remain the same dollar amount as it was for 2018.

The firm paid a dividend of $3,942 in 2018, and will maintain its 2018 dividend payout ratio for 2019.

The income tax rate for 2019 is expected to be the same as it was in 2018.  

 

Required:

Prepare the pro-forma 2019 income statement and balance sheet for XYZ Corporation. 

Answer 1