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In: Accounting

has assembled statements and information to prepare financial plans for the coming year 20xx+1. Income Statement...

has assembled statements and information to prepare financial plans for the coming year 20xx+1. Income Statement For the year ended 30 December 20xx (Thousands of Dollars) Sales $36,000 Operating expenses 32,440 Earnings before interest and taxes $3,560 Interest 560 Pre-tax earnings $3,000 Taxes 1,200 Net income $1,800 Cash dividends 810 Addition to retained earnings $990 Balance Sheet 31 December 20xx (Thousands of Dollars) Assets Liabilities and equities Cash $1,080 Accounts payable $4,320 Marketable securities 500 Taxes payable 180 Account receivable 6,480 Notes payable 5,300 Inventory 9,000 Total current liabilities $9,800 Total current assets $17,060 Non-current debt 3,500 Net fixed assets 12,600 Ordinary shares 3,500 Total assets $29,660 Retained earnings 12,860 Total liabilities and equities $29,660 Information relating to financial projections for the year 20XX+1: 1) Sales are projected to increase by 15%. 2) The interest rate on all debt is 10%, and cash earns no interest income. 3) Currently Cardington is operating at full capacity. Net fixed assets will change in direct response to the change in sales. 4) Dividend payout ratio will remain unchanged. 5) Cash will halve and marketable securities will double. 6) Notes payable, non-current debt, and ordinary shares will remain unchanged. 7) Accounts receivable, inventory, and accounts payable will change in direct response to the change in sales. Required: Prepare a pro forma income statement for the year ending 31 December 20XX+1, and a pro forma balance sheet as of 31 December 20XX+1. Calculate the resulting external financing needed

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Expert Solution

Pro Forma income statement for the year ending 31 December 20XX+1

Particulars

Amount

Sales (3600*1.15)

41400

Operating expenses

(32440)

Interest (3500*.10)

(350)

NP befor Tax

8610

TAX ( 40%)

(3444)

NP after TAX

5166

Cash Dividend (45:55)

2325

Addition to retained earnings (55:45)

2841

Pro forma balance sheet as of 31 December 20XX+1

Assets

Cash (1080*2)

2160

Marketable securities(500*2)

1000

Account receivable (6480*1.15)

7452

Inventory (9000*1.15)

10350

Net fixed assets (12600*1.15)

14490

Total Assets

35452

Liabilities

Retained earnings (12860+2841)

15701

Accounts payable

4320

Taxes payable

180

Notes payable (5300*1.15)

6095

Non-current debt

3500

Shares

3500

External financing needed

2156

Total Liabilities & Equity

35452

ekkarill92 answered 2 years ago
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