Question

Pro forma balance sheet   Peabody​ & Peabody has 2019 sales of $10.6 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​ receivable;

11.5%​, Inventory;17.6%​; Accounts​ payable;14.2%​; Net profit​ margin; 2.9%.

(2) Marketable securities and other current liabilities are expected to remain unchanged.

(3) A minimum cash balance of $483,000 is desired.​

(4) A new machine costing $646,000 will be acquired in​ 2020, and equipment costing $853,000 will be purchased in 2021. Total depreciation in 2020 is forecast as $289,000​, and in 2021 $394,000 of depreciation will be taken.​

(5) Accruals are expected to rise to $500,000 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 $11.7 million in 2020 and $11.8 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​).

Leonard Industries Balance Sheet December​ 31, 20192019
Assets			Liabilities and​ Stockholders' Equity
Cash	$403,000		Accounts payable	$1,398,000
Marketable securities	202,000		Accruals	$402,000
Accounts receivable	1,197,000		Other current liabilities	$80,100
Inventories	1,796,000		Total current liabilities	$1,880,100
Total current assets	$3,598,000		​Long-term debt	1,996,900
Net fixed assets	$3,995,000		Common stock	3,716,000
Pro Forma Balance Sheet Peabody & PeaBody December 31, 2021 Assets Current assets Cash $______ Marketable securties $_____ Accounts Receivable $______ Inventories $_____ total Current assets $______ Net Fixed assets $____ Total assets $____			Total liabilities & stockholder equity

Answer 1

Pro Forma Balance Sheet
Peabody & Peabody
31-Dec-21
Assets
Current assets
Cash	$      483,000.00
Marketable securities	$      202,000.00
Accounts receivable	$   1,357,000.00
Inventories	$   2,076,800.00
Total current assets	$   4,118,800.00
Net fixed assets (calculated below)	$   4,811,000.00
Total assets	$   8,929,800.00
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$   1,675,600.00
Accruals	$      500,000.00
Other current liabilities	$        80,100.00
Total current liabilities	$   2,255,700.00
Long-term debts	$   1,996,900.00
Total liabilities	$   4,252,600.00
Common equity (see below)	$   4,056,750.00
External funds required	$      620,450.00
Total liabilities and stockholders’ equity	$   8,929,800.00
1)
Beginning net fixed assets (January 1, 2020)	$   3,995,000.00
Plus: Fixed asset outlays (646000 + 853000)	$   1,499,000.00
Less: Depreciation expense (289000 + 394,000)	$    (683,000.00)
Ending net fixed assets (December 31, 2014)	$   4,811,000.00
2) Common equity is the sum of common stock and retained earnings.
Beginning common equity (January 1, 2020)	$   3,716,000.00
Plus: Net profits after taxes (2020)	$      339,300.00
Net profits after taxes (2021)	$      342,200.00
Less: Dividends paid (2020)	$    (169,650.00)
Dividends paid (2021)	$    (171,100.00)
Ending common equity (December 31, 2021)	$   4,056,750.00
b) Peabody & Peabody must arrange for additional financing of at least $620,450 over the next two years based on the given constraints and projections

26 Pro Forma Balance Sheet 27 Peabody & Peabody 28 44561 29 Assets 30 Current assets Cash Marketable securities Accounts receivable Inventories 35 Total current assets Net fixed assets (calculated below) 37 Total assets 38 Liabilities and stockholders' equity 39 Current liabilities Accounts payable Accruals Other current liabilities 43 Total current liabilities Long-term debts 45 Total liabilities Common equity (see below) 47 External funds required 48 Total liabilities and stockholders' equity 483000 202000 =11800000* 11.5% =11800000*17.6% =SUM(B31:B34) =B54 =B35+B36 =11800000*14.2% 500000 80100 =SUM(B40:B42) 1996900 =B43+B44 =B62 =B48-B45-B46 =B37 50 1) 51 Beginning net fixed assets (January 1, 2020) 52 Plus: Fixed asset outlays (646000 + 853000) 53 Less: Depreciation expense (289000 + 394,000) 54 Ending net fixed assets (December 31, 2014) 3995000 =646000+853000 --(289000+394000) =B51+B52+353 56 2) Common equity is the sum of common stock and retained earnings. 57 Beginning common equity (January 1, 2020) 58 Plus: Net profits after taxes (2020) 59 Net profits after taxes (2021) 150 Less: Dividends paid (2020) 61 Dividends paid (2021) 62 Ending common equity (December 31, 2021) 3716000 =11700000*2.9% =11800000*2.9% =-B58*50% =-B59*50% =SUM(B57:361)