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 (1) The firm has estimated that its sales for 2016 will be $800,300. (2) The firm expects to pay $35,900 in cash dividends in 2016 (3) The firm wishes to maintain a minimum cash balance of $30,500 (4) Accounts receivable represent approximately 24% of annual sales (5) The firm's ending inventory wll change directly win changes in sales in 2016. (6) A new machine costing S42,900 will be purchased in 2016. Total depreciation for 2016 will be $15,800 7) Accounts payable wil change directy 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 cammon siock will remain unchanged. a. Prepare a pro forma income statement for the year ended Decamber 31, 2016, using the percent-of-saiss method b. Prepare a pro forma balance sheet dated December 31, 2016, using the judgmental approach c. Analyze these statements, and discuss the resuling extornal financing required. o prapare the financial plans. The following financial data are also available a. Prepare a pro forma income statement for the year ended December 31, 2018, using the percent-of-sales method. Complete the pro forma income atatement for the year ended December 31, 2016 below (Round to the nearest dollar. Round the percentage of sales to four decimal places.] Pro Forma Income Statement Red Queen Restaurants for the Year Ended December 31, 2016 (percent-of-sales method) Sales Less: Cost of goods sold Groes profits Less: Operating expenses Net profits before taxes Less: Taxes (rate 40%) Net profts after taxes Less: Cash dwidends To Retained earnings

Explanation / Answer

Calculation of cost of goods sold % to sales in the year 2015= cost of goods sold /sales

= 599200/799600=74.93%

Calculation of Opetating exp to sales = operating exp/sales=99600/799600=12.45 %

Proforma Income statement of Red queen retaurent for the Year ended 31/12/2016

Sales -given 900,300

Less cost of goods sold (900,300* 74.93%) 674,595   

Gross profit 225,705

less operating exp(900300*12.45%)   112,087

Net profit before taxes 112,898

less Tax@ 40% 45,259

Net profit after taxes 67,739

Less cash divedend 35,900

Residual income 31,839

Proformabalance sheet of red queen for the year ended 31/12/16

Assets Amount Liabilities Amount

Cash 30500 Accounts Payable 111693

Marketable securities 17600 Taxes Payable 11315

Accounts receivables 169791 other current liabilities 4100

Inventory 112819 Total cuttent liabilities 127108

Total current Assets 376991 long term debt 202300

common stock 150000

Net Fixed Assets 377900 retained earnings 176339

Total assets 754891 Total Liabilities and 655747

Equity

Notes

Accounts receivables =150800/799600*900300=169791

Inventory =100200/799600*900300=112819

Net Fixed Assets =350800+42900-15800=377900

Accounts payable =99200/799600*900300=111693

Retained Earnings =175000-30500+31839
By seeing the statement we came to know that sales have been increases compared to the previous sales and the residual income is not muct increased as the dividend pay out is more no the firm does not require any additional funding

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