1. Prepare a pro forma balance sheet, assuming a 10 percent increase in sales, n
ID: 2651132 • Letter: 1
Question
1.
Prepare a pro forma balance sheet, assuming a 10 percent increase in sales, no new external debt or equity financing, and a constant payout ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
2.
Calculate the EFN. (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Consider the following income statement for the Heir Jordan Corporation:Explanation / Answer
Answer:
HEIR JORDAN CORPORATION
Income Statement
Current
Pro forma
Sales
48500
53350
(48500*110%)
Costs
34500
37950
(34500*110%)
Taxable income
14000
15400
(53350 - 37950)
Taxes (35%)
4900
5390
(15400*35%)
Net income
9100
10010
(15400 -5390)
Dividends
2900
3190
(10010*2900/9100)
Addition to retained earnings
6200
6820
(10010 -3190)
HEIR JORDAN CORPORATION
Performa Balance Sheet
Assets
Liabilities and Owners’ Equity
Current assets
Current liabilities
Cash (2500+6820-6200)
3120
Accounts payable
2400
Accounts receivable
3900
Notes payable
5000
Inventory
9000
Total
7400
Total
16020
Long-term debt
24000
Fixed assets
Owners’ equity
Net plant and equipment
37800
Common stock and paid-in surplus
15000
Retained earnings =6800 + (6820 -6200)
7420
Total
22420
Total assets
53820
Total liabilities and owners’ equity
53820
HEIR JORDAN CORPORATION
Income Statement
Current
Pro forma
Sales
48500
53350
(48500*110%)
Costs
34500
37950
(34500*110%)
Taxable income
14000
15400
(53350 - 37950)
Taxes (35%)
4900
5390
(15400*35%)
Net income
9100
10010
(15400 -5390)
Dividends
2900
3190
(10010*2900/9100)
Addition to retained earnings
6200
6820
(10010 -3190)
HEIR JORDAN CORPORATION
Performa Balance Sheet
Assets
Liabilities and Owners’ Equity
Current assets
Current liabilities
Cash (2500+6820-6200)
3120
Accounts payable
2400
Accounts receivable
3900
Notes payable
5000
Inventory
9000
Total
7400
Total
16020
Long-term debt
24000
Fixed assets
Owners’ equity
Net plant and equipment
37800
Common stock and paid-in surplus
15000
Retained earnings =6800 + (6820 -6200)
7420
Total
22420
Total assets
53820
Total liabilities and owners’ equity
53820
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