Question

Pro Forma Balance Sheet:

Pro forma balance sheet Peabody & Peabody has 2015 sales of $10.4 million. It wishes to analyze expected performance and financing needs for 2017-2 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 rece able: 11.6%, Inventory: 17.6% Accounts payable 13.7% Net profit margin, a (2) Marketable securities and other current liabilities are expected to remain unchanged. (3) A minimum cash balance of $475,000 is desired. (4) A new machine costing $653,000 will be acquired in 2016, and equipment costing $855,000 will be purchased in 2017. Total depreciation in 2016 is forecast as $291,000, and in 2017 $385,000 of depreciation will be taken. (5) Accruals are expected to rise to $495,000 by the end of 2017. (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 S11.5 million in 2016 and $11.5 million in 2017 1% (10) The December 31, 2015, balance sheet is here EEB

Just need Common Stock & Retained Earnings, External Funds required, and Total liabilities and stockholders equity, and the multiple choice question

Answer 1

Solution: The workings of Income Statement and Project Balance Sheet is as under:-

Income Statement	2015	2016	2017
Sales	10400000	11500000	11500000
Profit Margin	322400	356500	356500
DPO		178250	178250
Retained Earning		178250	178250

Assets	2015	2016	2017		Liabilities and Stockholders Equity	2015	2016	2017
Cash	$3,98,000.00	$4,75,000.00	$4,75,000.00		Accounts Payable	$14,02,000.00	$15,75,500.00	$15,75,500.00
Marketable Sec	$1,98,000.00	$1,98,000.00	$1,98,000.00		Accruals	$3,99,000.00	$3,99,000.00	$4,95,000.00
Account Receivables	$12,01,000.00	$13,34,000.00	$13,34,000.00		OCL	$79,500.00	$79,500.00	$79,500.00
Inventories	$18,01,000.00	$20,24,000.00	$20,24,000.00		TCL	$18,80,500.00	$20,54,000.00	$21,50,000.00
TCA	$35,98,000.00	$40,31,000.00	$40,31,000.00		Long Term Debt	$19,95,500.00	$19,95,500.00	$19,95,500.00
Net Fixed Assets	$39,95,000.00	$43,57,000.00	$48,27,000.00		Common Stock	$37,17,000.00	$37,17,000.00	$37,17,000.00
Total Assets	$75,93,000.00	$83,88,000.00	$88,58,000.00		Net Profit	$0.00	$1,78,250.00	$3,56,500.00
					External Fund Required	$0.00	$4,43,250.00	$6,39,000.00
					Total Liabilities and Stock holders Equity	$75,93,000.00	$83,88,000.00	$88,58,000.00

Thus Common Stock will be $37,17,000.00; Retained Earning: for 2017: $3,56,500.00, External Funds required for 2017: $ 6,39,000.00 and Total Liabilities and Stock Holders Equity: $88,58,000.00

Ans for Multiple choice question is option (b).