Question

Pro forma balance sheet Peabody & Peabody has 2019 sales of $10.5 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; 12.2%, Inventory; 17.8%; Accounts payable, 14.5%; Net profit margin, 2.7%. (2) Marketable securities and other current liabilities are expected to remain unchanged. (3) A minimum cash balance of $479,000 is desired. (4) A new machine costing $646,000 will be acquired in 2020, and equipment costing $845,000 will be purchased in 2021. Total depreciation in 2020 is forecast as $295,000, and in 2021 $391,000 of depreciation will be taken. (5) Accruals are expected to rise to $503,000 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 $11.6 million in 2020 and $11.6 million in 2021.

Answer 1

Pro Forma Balance Sheet
Peabody & Peabody
31-Dec-21
Assets
Current Assets
Cash	$      479,000
Marketable Securities	$      201,000
Accounts Receivable	$   1,415,200
Inventories	$   2,064,800
Total Currrent Assets	$   4,160,000
Net Fixed Assets	$   4,800,000
Total Assets	$   8,960,000
Accounts Receivable (11600000*12.2%)	$   1,415,200
Inventories (11600000*17.8%)	$   2,064,800
Net Fixed Assets	$   4,800,000
3995000+646000+845000-(295000+391000)