Question

1. Consider the following simplified financial statements for York Corporation. The company has predicted a sales increase of 15%. It has predicted that every item on the balance sheet will increase by 15% as well. Create the pro forma statements = and reconcile them

Income Statement   

Sales	$36,000
Costs of goods	$29,800
Net Income	$6,200

Balance Sheet

Assets	$26,400	Debt	$6,300
		Equity	$20,100
Total Assets	$26,400	Total Liab's & Equity	$26,400

2. Assume York Corp. (above) pays out half of the net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements and determine the external financing needed.

Answer 1

	Income Statement
			Projected = A*B
	A	B
	Amount	Percentage increase (15%)	Amount
Sales	36000	115%	41400
cost of goods sold	29800	115%	34270
Net income	6200	115%	7130
Dividend	3100	115%	3565
Retained Earnings	3100	115%	3565
Balance sheet
	A	B	Projected = A*B				Projected = C*D
	Amount	Percentage increase (15%)	Amount		Amount	Percentage increase (15%)	Amount
				Debt	6300	115%	7245
Assets	26400	115%	30360	Equity	20100	115%	23115
Total	26400		30360	Total	26400		30360
External Finance need =Current Total Asset or Current Total Liability - Projected Total Asset or Total Liability = 30360-26400				3960