Provincial Imports, Inc., has assembled last year's financial statements (income statement and balance sheet
and financial projections for use in preparing financial plans for the coming year.
Information related to financial projections for next year is as follows:
(1) Projected sales are
$6,006,000.
(2) Cost of goods sold last year includes
$998,000
in fixed costs.
(3) Operating expense last year includes
$246,000
in fixed costs.
(4) Interest expense will remain unchanged.
(5) The firm will pay cash dividends amounting to
35%
of net profits after taxes.
(6) Cash and inventories will double.
(7) Marketable securities, notes payable, long-term debt, and common stock will remain unchanged.
(8) Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales.
(9) A new computer system costing
$364,000
will be purchased during the year. Total depreciation expense for the year will be
$116,000.
(10) The tax rate will remain at
40%.
a. Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent-of-sales method.
Extracted text: a. Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent-of-sales method. Complete the pro forma income statement for next year below: (Round to the nearest dollar.) Data table Pro Forma Income Statement Provincial Imports, Inc. for Next Year Provincial Imports, Inc. Income Statement for the Year Just Ended (percent-of-sales method) Sales revenue $5,006,000 Sales $ 6,006,000 Less: Cost of goods sold Gross profits Less: Operating expenses 2,741,000 Less: Cost of goods sold 3,089,182 $2,265,000 855,000 Gross profits 2,916,818 $1,410,000 Operating profits Less: Interest expense Less: Operating expenses 201,000 Net profits before taxes Less: Taxes (rate = 40%) Operating profits $ $1,209,000 483,600 Less: Interest expense Net profits after taxes $725,400 Net profits before taxes Less: Cash dividends 253,890 Less: Taxes (rate = 40%) To retained earnings $471,510 %3D Net profits after taxes (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Less: Cash dividends (35%) 365,229 Provincial Imports, Inc. Balance Sheet for the Year Just Ended To Retained earnings Assets Liabilities and Stockholders' Equity Accounts payable Taxes payable Cash $190,000 $700,000 Marketable securities 230,000 95,000 %24
Extracted text: Data table $1,410,000 Operating profits Less: Interest expense 201,000 Net profits before taxes $1,209,000 Less: Taxes (rate = 40%) 483,600 Net profits after taxes $725,400 Less: Cash dividends 253,890 To retained earnings $471,510 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Provincial Imports, Inc. Balance Sheet for the Year Just Ended Assets Liabilities and Stockholders' Equity Accounts payable Taxes payable Notes payable Cash $190,000 $700,000 Marketable securities 230,000 95,000 Accounts receivable 635,000 205,000 Inventories 508,000 Other current liabilities 4,800 Total current assets $1,563,000 Total current liabilities $1,004,800 Net fixed assets 1,408,000 Long-term debt 512,200 Common stock 77,000 Retained earnings 1,377,000 Total assets $2,971,000 Total liabilities and equity $2,971,000