Question

LUKE’S HOLIDAY SUPPLIES, INC.

Pro Forma Statements Problem

A)        1.             Income Statement                                                          Balance Sheet

                             Year Ended 2018                                                              12/31/18

            Sales                                               $12,520                Cash                                                    $   110

            Cost of Goods Sold                            9,698                Marketable Securities 360

            Gross Profit                                        2,882                Accounts Receivable 2,220

            Expenses                                            1.594                Inventory 3,210

            Earnings Before Interest and Tax      1,228                Total Current Assets 5,900

            Interest                                                  278

Earnings Before Tax                           950                Property/Plant/Equipment       4,730

            Tax (40%)                                           380                Accumulated Depreciation     680

            Net Income                                           570                    Net Fixed Assets 4,050

           

Total Assets $ 9,950

                                                                                                Accounts Payable                               $ 1,020

                                                                                                Notes Payable                                         950

                                                                                                Accrued Expenses                                   610

                                                                                                Accrued Tax                                             450

                                                                                                    Total Current Liabilities 3,030

                                                                                                Long Term Liabilities 2,500

                                                                       

                                                                                                    Total Liabilities 5,530

Common Stock – no par 2,000

Retained Earnings 2,420 Total Equity                                   4,420

                                                                                                Total Liabilities and Equity            $ 9,950

Based on the 2018 Financial Statements above, compute Pro Forma’s for 2019 using the percent of sales method using the following assumptions:

1. 24.6% growth rate in sales,
2. Tax rate remains at 40%, and
3. Dividend payout remains at $450

                                                                                         

Answer 1

a)
LUKE’S HOLIDAY SUPPLIES, INC.
Income statement	Current	Percentage of Sales	Proforma
Sales	$       12,520.00	100.000%	$ 15,599.92
Cost	$         9,698.00	77.460%	$ 12,083.71
Gross Profit	$         2,822.00	22.540%	$   3,516.21
Expenses	$         1,594.00	12.732%	$   1,986.12
EBIT	$         1,228.00	9.808%	$   1,530.09
Less: Interest	$            278.00		$      278.00
EBT	$            950.00		$   1,252.09
Taxes (40%)	$            380.00		$      500.84
Net income	$            570.00		$      751.25
Dividends	$            450.00		$      450.00
Addition to retained earnings	$            120.00		$      301.25
LUKE’S HOLIDAY SUPPLIES, INC.
Pro Forma Statement of Financial Position
Assets	Current Year	Percentage of Sales	Proforma	Liabilities and Owners’ Equity		Percentage of Sales	Proforma
Current assets				Current liabilities
Cash	110	0.879%	$      137.06	Accounts payable	1,020	8.15%	$   1,270.92
Accounts receivable	2,220	17.732%	$   2,766.12	Notes payable	950	N/A	$      950.00
Marketable Securities	360		$      360.00	Accured Expense	610	4.87%	$      760.06
Inventory	3,210	25.639%	$   3,999.66	Accured Tax	450	N/A	$      450.00
Total	5,900	47.125%	$   7,351.40	Total Current Liabilities	3,030	24.20%	$   3,430.98
Fixed assets				Long-term debt	2,500	N/A	$   2,500.00
Property/Plant/Equipment	4,730			Total Liabilities	5,530	N/A	$   5,930.98
Less :Accumulated Depreciation	-680			Owners’ equity
Net plant and equipment	4,050	32.348%	$   5,046.30	Common stock and paid-in surplus	2,000	N/A	$   2,000.00
Total assets	9,950	79.473%	$ 12,397.70	Retained earnings =2420 + 301.25	2,420	N/A	$   2,721.25
				Total Equity	4,420	N/A	$   4,721.25
				Total liabilities and owners’ equity	9,950	N/A	$ 10,652.23
EFN = Total assets –Total liabilities and equity
EFN = 12397.70 - 10652.23	$         1,745.47