Peabody & Peabody has 2018 sales of $10.8 million. It wishes to analyze expected
ID: 2809614 • Letter: P
Question
Peabody & Peabody has 2018 sales of $10.8 million. It wishes to analyze expected performance and financing needs for 2021—2
years ahead. Given the following information, respond to parts a. and b.
(1) The percents of sales for items that vary directly with sales are as follows: Accounts receivable; 11.6%, inventory; 17.6%;
Accounts payable, 13.6%;
Net profit margin, 2.9%.
(2) Marketable securities and other current liabilities are expected to remain unchanged.
(3) A minimum cash balance of $485,000 is desired.
(4) A new machine costing $654,000 will be acquired in 2020, and equipment costing $852,000 will be purchased in
2021. Total depreciation in 2020 is forecast as $286,000, and in 2021 $386,000 of depreciation will be taken.
(5) Accruals are expected to rise to $495,000 by the end of 2021.
(6) No sale or retirement of long-term debt is expected.
(7) No sale or repurchase of common stock is expected.
(8) The dividend payout of 50% of net profits is expected to continue.
(9) Sales are expected to be $11.9 million in 2020 and $11.9 million in 2021.
(10) The December 31, 2019, balance sheet is here
.a. Prepare a pro forma balance sheet dated December 31,2021.
b. Discuss the financing changes suggested by the statement prepared in part
(a).
a. Prepare a pro forma balance sheet dated December 31,2021.
Complete the assets part of the pro forma balance sheet for Peabody & Peabody for December 31,2021 below:(Round to the nearest dollar.)
Pro Forma Balance Sheet
Peabody & Peabody
December 31, 2021
Assets
Current assets
Cash
$
Marketable securities
$
Accounts receivable
$
Inventories
$
Total current assets
$
Net fixed assets
$
Total assets
$
Leonard Industries Balance Sheet December 31, 20192019
Assets
Liabilities and Stockholders' Equity
Cash
$401,000
Accounts payable
$1,395,000
Marketable securities
202,000
Accruals
405,000
Accounts receivable
1,201,000
Other current liabilities
80,500
Inventories
1,799,000
Total current liabilities
$1,880,500
Total current assets
$3,603,000
Long-term debt
2,003,500
Net fixed assets
3,997,000
Common stock
3,716,000
Total assets
Modifying $7,600,000
Total liabilities and
stockholders' equity
Pro Forma Balance Sheet
Peabody & Peabody
December 31, 2021
Assets
Current assets
Cash
$
Marketable securities
$
Accounts receivable
$
Inventories
$
Total current assets
$
Net fixed assets
$
Total assets
$
Leonard Industries Balance Sheet December 31, 20192019
Assets
Liabilities and Stockholders' Equity
Cash
$401,000
Accounts payable
$1,395,000
Marketable securities
202,000
Accruals
405,000
Accounts receivable
1,201,000
Other current liabilities
80,500
Inventories
1,799,000
Total current liabilities
$1,880,500
Total current assets
$3,603,000
Long-term debt
2,003,500
Net fixed assets
3,997,000
Common stock
3,716,000
Total assets
Modifying $7,600,000
Total liabilities and
stockholders' equity
Explanation / Answer
WN:
Pro Forma Balance Sheet Peabody and peabody Dec 31. 2021 Assets Amount ($) Cash 485,000 Marketable securities 202,000 Accounts receivable (11.6% x $11.9 M) 1,380,400 Inventories (17.6% x $11.9 M) 2,094,400 Fixed assets (WN) 4,831,000 8,992,800Related Questions
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