Integrative-Pro forma statements Red Queen Restaurants wishes to prepare financi

Question

Integrative-Pro forma statements

Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided here to prepare the financial plans. The following financial data are also available:

(1) The firm has estimated that its sales for 2016 will be $899,300.

(2) The firm expects to pay $34,300 in cash dividends in 2016.

(3) The firm wishes to maintain a minimum cash balance of $31,000.

(4) Accounts receivable represent approximately 23% of annual sales.

(5) The firm's ending inventory will change directly with changes in sales in 2016.

(6) A new machine costing $42,200 will be purchased in 2016. Total depreciation for 2016 will be $15,100.

(7) Accounts payable will change directly in response to changes in sales in 2016.

(8) Taxes payable will equal one-fourth of the tax liability on the pro forma income statement.

(9) Marketable securities, other current liabilities, long-term debt, and common stock will remain

a. Prepare a pro forma income statement for the year ended December 31, 2016, using the percent-of-sales method. (Round to the nearest dollar. Round the percentage of sales to four decimal places.)

b. Prepare a pro forma balance sheet dated December 31, 2016, using the judgmental approach.

c. Analyze these statements, and discuss the resulting external financing required.

creen not 2018-09-25 at 3.35.48 PM Search Red Queen Restaurants Income Statement for the Year Ended December 31, 2015 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Cash dividends To retained earnings $799,600 599,400 $200,200 100,700 $99,500 39,800 $59,700 19,000 $40,700 Red Queen Balance Sheet.jpg.png Search Red Queen Restaurants Balance Sheet December 31, 2015 Assets Cash Marketable securities Accounts receivable Inventories Liabilities and Stockholders' Equity $32,500 Accounts payable $99,900 19,100 4,900 $123,900 $200,900 $149,700 $175,000 $649,500 18,000 Taxes payable 149,200 99,800 Other current liabilities Total current liabilities $299,500 Long-term debt 350,000 Common stoclk Total current assets Net fixed assets Retained earnings Total liabilities and equity Total assets $649,500

Explanation / Answer

ROFORMA INCOME STATEMENT FOR THE YEAR ENDED 31.12.2016 Sales $8,99,300 Less: Cost of goods sold (599400/799600*899300) $6,74,138 Gross Profit $2,25,162 Less: Operating expenses (100700/799600*899300) $1,13,256 (It has been assumed that expense will increase in proportion to sales) Net Profit before tax $1,11,906 Less: Tax @40% $44,763 Net profit after tax $67,144 Less: Cash Dividend $34,300 Transferred to retained earnings $32,844 PROFORMA BALANCE SHEET AS ON 31.12.2016 Assets Liabilites A/c Recievables      (149200/799600*899300) $1,67,803 A/c payable   ( 99900/799600*899300) $1,12,356 Inventory         ( 99800/799600*899300) $1,12,244 Tax Payable   (44762.56/4) $11,191 Securities        $18,000 Other Current Liab $4,900 Cash(B/f) $11,944 Toatl Current liab $1,28,447 Total Current Asset $3,09,991 Long term debts $2,00,900 Fixed Assets (350000+42000-15100) $3,76,900 Common Stock $1,49,700 Retained earning (175000+32843.83) $2,07,844 $6,86,891 $6,86,891

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