I do not know how to calculate the equity, the total for the right side of the b

Question

I do not know how to calculate the equity, the total for the right side of the balance sheet (assuming they are not going to be balanced) and the External Financing Needed.

Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes) Income Statement Sales Costs Balance Sheet $30,900 Assets $25,450 Debt $ 6,950 18,500 23,060 Equity Net income 7,840 Total $25,450 Total $25,450 The company has predicted a sales increase of 12 percent. Assume Fire pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Round your answers to the nearest whole dollar amount.) Pro forma income statement Pro forma balance sheet $ 28503 Debt Sales S 34608 Assets $ 6950 Costs 25828 Equity Net income $ 8780 Total $ 28503 Total Determine the external financing needed. (Negative amount should be indicated by a minus sign.) External financing needed

Explanation / Answer

1. Equity = 22890

A balance sheet always has to be balanced

External financing = -1337

When you added external financing needed (-1337) + Equity (22890) + Debt (6950) = 28503 (your balance sheet wil be matched)

Half of the this year profit (8780) will be added to the previous years equity of 18500 to give you equity for this year. Add that to debt and minus the external financing to balance the balance sheet

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