Question

MG 491 - Senior Capstone Pro Forma Income Statements - Blue Specialty Corporation Homework Assignment - Part 1 of 2 Dr. Drea Blue Specialty Corporation, Ohio Division For the Year ended December 31, 2019 Revenues and Gains Sales revenues $300,000 Interest revenues (T-Bill) $20,000 Gain on sales of assets $18,500 Total revenue and gains $338,500 Blue Specialty Corp. sells specialty advertising items The company operates in select markets within the US and is considering expansion into Missouri and lowa, Blue Specialty's product mix is purchased from manufacturers in China and imported for sale through Blue. Blue Specialty has estimated that sales for the two potential markets would be proportional to their population. Blue Specialty products are primarily sold through a combination of its web site, calling selected customers by phone, and e-mail. Salaries are paid through another division of Blue Specialty. Expenses and losses Cost of goods sold Commissions expense Office supplies expense Office equipment expense Advertising expense Utilities expense Total expenses and losses Net income before taxes Income tax Net income after tax $180,000 $24,000 $5,000 $2.500 $6,000 $4,000 $221,500 $117,000 $17,550 $99,450 To the left is the 2019 income statement for Blue's Ohio Division. The populations for Ohio and the other two markets under consideration are: • Ohio: 11,590,000 • Missouri: 6,064,000 • lowa: 3,017,000 Your task is to create separate pro forma income statements on each of these two potential markets. Keep in mind that some expenses (CG5, commissions) are likely to be proportional to sales, some expenses are fixed (advertising, office expenses, utilities), and some are one-time items (sale of assets), and some revenues can be fixed (interest revenue on a treasury bill, etc.) Calculate the appropriate pro forma income statements for 2020, then make a recommendation on what actions should be pursued.

Answer 1

Proforna for the Income statement year ended 31st Dee 2020 Missoun lowa ins) can & REV BAU BS AND GAINS sales Interest Revenue Revenue 15696378093 104645206 Total Revenue & Clains. 167427 83299 EXPENSES AND Losses og Cost of Goods sald Commissious eupenon affice supplees expense affice equipment cupense Adrestiging eupense do Uhlities eupense 94178 46856 125576247 5000 Sood & Soo 16000 6000 4000 I 4000 Total expenses & Lossen 124235 70603 Net Income before Income Tanj Tanes a 143192 h 12 696 |(6479) |(1904 [36713 1079 Nel Pulove after Tan

sales Revenue a n d Missouri a 6,064,000 $300,000 X 11,590,000 2) $ 156,963 о - 2 Lowe e) $ 300,000 11,590,oo x 3,017, oro I 7) 78093.$ 2. WN 2 entered Revenue wodvor x 6,064,000 = $ 10464 Mussouri f -$20000 vood o oo 11,590,000 lowa ) x 3,017, ow of $5206 $10,000 H1;590,000 -WN3 Car on sele one time cupenne nd be incurred of Asset is an therefore it will in the next year

WNY - Cost Sales of Goods & seld are proptions to 60t. af Seles Mussou o al $156,963 X60). 2) $94178 $ 78093 X 60% ) 46856$. Lowa 2 000024 OP) WNS communion expense - Missouris & 1S6, 963 X 8% CO 8% of sello ) 125578 Lowa & $ 78093 % 8 % & 6 247 Lord) affice Supplies eupense, office elupment eipense, Adrestining expense & Utilities expense al fixed. Therefore, They will remain the same with ON7 Income Tan $ 17550 $117000 & 15%