DH o , Joshua Pro Forma Assignment 9.19.18 Compatibility Mode Q- Search in Docum
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DH o , Joshua Pro Forma Assignment 9.19.18 Compatibility Mode Q- Search in Document AutoSaveOFF Home Insert Design Layout References Mailings Review View Share JOSHUA, INC Pro Forma Statements Problem A) Income Statement Ycar Ended 2017 Balance Sheet 12/31/17 527,000 18.900 8,100 Sales Cost of Goods Sold Gross Profit Expenses Eamings Before Tax Tax (.5) Ne Income Cash Accounts Reccivable Inventory Gross Fixed Assets Accumalated Depreciation Net Fixed Assers Toal AsSC0S S 500 34,000 21600 2,100 32.400 Accounts Payable Nous Payable Acuud Tax Common Stock Rctained Earnings Total Debt & Equiry S 1,573 19,175 263 15,787 $40550 A. Based on the 2017 Financial Statemes above, compure Pro Foma's for 2018 using the percene of sales method using e following assumptions: 20% growth rate in sales, and 15% dividend payout b, Page 1 of 1 116 words English (United States) + 100% -- Focus-Explanation / Answer
The percent of sales method is a method used for forecasting. According to this method, it is assumed that all the items related to sales like cost of goods sold, expenses, cash, accounts receivable, inventory, net fixed assets, accounts receivable, etc. change in correlation to the change in sales.
In the given question, percentage of sales calculations for the current year (2017):
Cost of Goods Sold = 18900 / 27000 * 100 = 70%
Expenses = 6000 / 27000 * 100 = 22.22%
Cash = 500 / 27000 * 100 = 1.85%
Accounts Receivable = 4500 / 27000 * 100 = 16.67%
Inventory = 3150 / 27000 * 100 = 11.67%
Gross Fixed Assets = 54000 / 27000 * 100 = 200%
Accumulated Depreciation = 21600 / 27000 * 100 = 80%
Accounts Payable = 1575 / 27000 * 100 = 5.83%
Calculation of Sales for 2018
Sales (2018) = Existing Sales + growth in sales = 27000 + 20% = $ 32,400
Pro-forma Income Statement for the year ended 20187
Particulars
Amount ($)
% of Sales
Sales
32,400
100.00
Cost of Goods Sold
22,680
70.00
Gross Profit
9,720
Expenses
7,200
22.22
Earnings Before Tax
2,520
Tax (0.5)
1,260
Net Income
1,260
Dividends (Dividend Payout = 15% of Net Income)
189
Addition to Retained Earnings
1,071
Partial Pro-forma Balance Sheet as on 31/12/2018
Particulars
Amount ($)
Amount ($)
% of Sales
Cash
600
1.85
Accounts Receivable
5,400
16.67
Inventory
3,780
11.67
Gross Fixed Assets
64,800
200.00
Accumulated Depreciation
25,920
80.00
Net Fixed Assets
38,880
Total Assets
48,660
Accounts Payable
1,890
5.83
Notes Payable
19,175
Accrued Tax
263
Common Stock
15,787
Retained Earnings (3750 + 1071)
4,821
Total Debt and Equity
41,936
Calculation of External Financing Needed
= Total Partial Pro-forma Assets – Total Partial Pro-forma Debt and Equity
= 48,660 – 41,936
= 6,724
The external financing can be done through various sources like by issuing debentures, by taking a loan or by issuing common stock. Here, we will assume that external financing has been done through a loan (long-term debt).
Pro-forma Balance Sheet as on 31/12/2018
Particulars
Amount ($)
Amount ($)
% of Sales
Cash
600
1.85
Accounts Receivable
5,400
16.67
Inventory
3,780
11.67
Gross Fixed Assets
64,800
200.00
Accumulated Depreciation
25,920
80.00
Net Fixed Assets
38,880
Total Assets
48,660
Accounts Payable
1,890
5.83
Notes Payable
19,175
Long-Term Debt
6,724
Accrued Tax
263
Common Stock
15,787
Retained Earnings (3750 + 1071)
4,821
Total Debt and Equity
48,660
Particulars
Amount ($)
% of Sales
Sales
32,400
100.00
Cost of Goods Sold
22,680
70.00
Gross Profit
9,720
Expenses
7,200
22.22
Earnings Before Tax
2,520
Tax (0.5)
1,260
Net Income
1,260
Dividends (Dividend Payout = 15% of Net Income)
189
Addition to Retained Earnings
1,071
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