Question

The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. CROSBY, INC. 2017 Income Statement Sales $ 748,000 Costs 583,000 Other expenses 19,000 Earnings before interest and taxes $ 146,000 Interest paid 15,000 Taxable income $ 131,000 Taxes (25%) 32,750 Net income $ 98,250 Dividends $ 29,475 Addition to retained earnings 68,775 CROSBY, INC. Balance Sheet as of December 31, 2017 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 20,740 Accounts payable $ 54,900 Accounts receivable 43,680 Notes payable 14,100 Inventory 92,960 Total $ 69,000 Total $ 157,380 Long-term debt $ 131,000 Fixed assets Owners’ equity Net plant and equipment $ 424,000 Common stock and paid-in surplus $ 115,000 Retained earnings 266,380 Total $ 381,380 Total assets $ 581,380 Total liabilities and owners’ equity $ 581,380 In 2017, the firm operated at 75 percent of capacity. Construct the pro forma income statement and balance sheet for the company. Assume that fixed assets are sold so that the company has a 100 percent asset utilization. (Do not round intermediate calculations.)

Answer 1