Question

Problem 4-25 Capacity Usage and Growth [LO2] - Do not sell fixed assets

The most recent financial statements for Retro Machine, Inc., follow. Sales for 2017 are projected to grow by 10 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.

RETRO MACHINE, INC. 2016 Income Statement
Sales				$	744,050
Costs					578,850
Other expenses					15,550
Earnings before interest and taxes				$	149,650
Interest paid					11,300
Taxable income				$	138,350
Taxes (35%)					48,423
Net income				$	89,928
Dividends	$	26,989
Addition to retained earnings		62,939

RETRO MACHINE, INC. Balance Sheet as of December 31, 2016
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	22,990		Accounts payable	$	61,390
Accounts receivable		36,710		Notes payable		15,420
Inventory		78,280		Total	$	76,810
Total	$	137,980		Long-term debt	$	142,100
Fixed assets				Owners’ equity
Net plant and equipment	$	371,890		Common stock and paid-in surplus	$	127,000
				Accumulated retained earnings		163,960
				Total	$	290,960
Total assets	$	509,870		Total liabilities and owners’ equity	$	509,870

In 2016, the firm operated at 70 percent of capacity. Construct the pro forma income statement and balance sheet for the company. Assume that the company cannot sell fixed assets. This implies that asset utilization may remain less than 100 percent next year as well. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

Pro Forma Income Statement
Sales	$
Costs
Other expenses
EBIT	$
Interest
Taxable income	$
Taxes (35%)
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	$
Fixed assets				Owners’ equity
Net plant and equipment	$			Common stock and paid-in surplus	$
				Accumulated retained earnings
				Total	$
Total assets	$			Total liabilities and owners’ equity	$

What is the EFN? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g. 32. A negative answer should be indicated by a minus sign.)
  
EFN           $

I got answer for EFN is -62165 but it say is not correst, can anyone solve this for me thank you

Answer 1

RETRO MACHINE, INC.
2017 Performa Income Statement
	2016	2017	Working
Sales	$744,050	$818,455	=$744050*110%
Less: Costs	$578,850	$636,735	=$578850*110%
Less: Other expenses	$15,550	$17,105	=15550*110%
Earnings before interest and taxes	$149,650	$164,615
Less: Interest paid	$11,300	$11,300	Interest Paid Constant
Taxable income	$138,350	$153,315
Less: Taxes (35%)	$48,423	$53,660	Tax Rate Same
Net income	$89,928	$99,655
Dividends	$26,989	$29,908	=(26989/89928)*99655
Addition to retained earnings	$62,939	$69,747

RETRO MACHINE, INC.
2017 Proforma Balance Sheet
Current Asets			Current liabilties
Cash (22990*110%)	$25,289		Accounts payable(61390*110%)	$67,529
Accounts receivable(36710*110%)	$40,381		Notes payable	$15,420
Inventory (78280*110%)	$86,108		Total		$82,949
Total		$151,778	Long term debt		$142,100
Fixed assets			Owner's equity
Net Plant.equipment		$371,890	Common stock		$127,000
			Retained earnings (163960+69747)		$233,707
Total Assets		$523,668	Total		$585,756

EFN (Negative)

-$62,088