Solve Assets LIABILITIES CASH $11,417.00 ACCOUNTS PAYABLE $1,298.00 ACCOUNTS REC

Question

Solve Assets                                   LIABILITIES         

                                                               

CASH     $11,417.00 ACCOUNTS PAYABLE      $1,298.00

ACCOUNTS RECEIVABLE $1,580.00                             ACCRUED LIABILITIES     $3,255.00

INVENTORY $1,603.00 TOTAL CURRENT LIABILITIES $4,553.00

TOTAL CURRENT ASSETs $1,460.00 SHAREHOLDER'S EQUITY $10,511.00

FIXED ASSETS     $464.00                                

TOTAL ASSETS   $15,064.00 TOTAL LIABILITIES AND EQUITY $15,064.00

INCOME STATEMENT
SALES $11,200.00
COST OF GOODS SOLD $1,680.00
GROSS PROFIT $9,520.00
OPERATING EXPENSE $16,530.00
OPERATING PROFIT -$7,010.00
INTEREST EXPENSE $790.00
PROFIT BEFORE TAXES -$7,800.00
TAXES $0.00
NET PROFIT -$7,800.00

Question 1. Prepare a pro forma income statement.
Question 2: Prepare a pro forma balance sheet.
Question 3: Does this company need external financing?

A. GENETICS EXPECTS SALES TO DOUBLE IN THE COMING YEAR B. COST OF GOODS SOLD AS A PERCENT OF SALES WILL REMAIN CONTANT, WHICH MEANS THAT THE GROSS PROFIT MARGIN WILL ALSO REMAIN CONSTANT C. OPERATING EXPENSES AND INTEREST WILL REMAIN THE SAME D. PROFITS BEFORE TAXES WILL BE TAXED AT 20% E. ALL PROFITS WILL BE REINVESTED IN THE COMPANY

Question 1. Prepare a pro forma income statement.
Question 2: Prepare a pro forma balance sheet.
Question 3: Does this company need external financing?

Explanation / Answer

1

GENETICS

Pro forma income statement

Sales (11200*2) =

$   22,400.00

Less: Cost of Goods sold (22400*1680/11200) =

$   (3,360.00)

Gross Profit

$   19,040.00

Less: Operating Expenses

$ (16,530.00)

Operating Profit

$      2,510.00

Less: Interest expense

$       (790.00)

Profit Before taxes

$      1,720.00

Less: Taxes (1720*20%)

$       (344.00)

Net Profit

$      1,376.00

2

GENETICS

Pro forma Balance Sheet

Assets

Cash (11417*120%)

$   13,700.40

Accounts Receivables (1580*120%)

$      1,896.00

Inventory (1603*120%)

$     1,923.60

Total Current Assets

$   17,520.00

Fixed Assets

$         464.00

Total Assets

$   17,984.00

Liabilities

Accounts Payable (1298*120%)

$      1,557.60

Accrued Liabilities (3255*120%)

$      3,906.00

Total Current Liabilities

$      5,463.60

External Financing (17984-5463-11887)

$         634.00

Shareholder's Equity (10511+1376)

$   11,887.00

Total Liabilities and Shareholder's Equity

$   17,984.60

3

External financing shall be required and it shall be $634

(Please see calculations in part-2)

1

GENETICS

Pro forma income statement

Sales (11200*2) =

$   22,400.00

Less: Cost of Goods sold (22400*1680/11200) =

$   (3,360.00)

Gross Profit

$   19,040.00

Less: Operating Expenses

$ (16,530.00)

Operating Profit

$      2,510.00

Less: Interest expense

$       (790.00)

Profit Before taxes

$      1,720.00

Less: Taxes (1720*20%)

$       (344.00)

Net Profit

$      1,376.00

2

GENETICS

Pro forma Balance Sheet

Assets

Cash (11417*120%)

$   13,700.40

Accounts Receivables (1580*120%)

$      1,896.00

Inventory (1603*120%)

$     1,923.60

Total Current Assets

$   17,520.00

Fixed Assets

$         464.00

Total Assets

$   17,984.00

Liabilities

Accounts Payable (1298*120%)

$      1,557.60

Accrued Liabilities (3255*120%)

$      3,906.00

Total Current Liabilities

$      5,463.60

External Financing (17984-5463-11887)

$         634.00

Shareholder's Equity (10511+1376)

$   11,887.00

Total Liabilities and Shareholder's Equity

$   17,984.60

3

External financing shall be required and it shall be $634

(Please see calculations in part-2)

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