Question

The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 30 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				$	755,000
Costs					590,000
Other expenses					26,000
Earnings before interest and taxes				$	139,000
Interest paid					22,000
Taxable income				$	117,000
Taxes (22%)					25,740
Net income				$	91,260
Dividends	$	28,291
Addition to retained earnings		62,969

CROSBY, INC. Balance Sheet as of December 31, 2017
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	21,440		Accounts payable	$	55,600
Accounts receivable		44,380		Notes payable		14,800
Inventory		99,960		Total	$	70,400
Total	$	165,780		Long-term debt	$	138,000
Fixed assets				Owners’ equity
Net plant and equipment	$	431,000		Common stock and paid-in surplus	$	118,500
				Retained earnings		269,880
				Total	$	388,380
Total assets	$	596,780		Total liabilities and owners’ equity	$	596,780

In 2017, the firm operated at 80 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.) Pro Forma Income Statement Sales Costs Other expenses EBIT Interest Taxable income Taxes Net income Pro Forma Balance Sheet Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash Accounts payable Accounts receivable Notes payable Inventory Total Total Long-term debt Owners’ equity Fixed assets Common stock and paid-in surplus Net plant and equipment Retained earnings Total Total assets Total liabilities and owners’ equity What is the EFN? (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)

Answer 1