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Create an Excel spreadsheet to organize your answers to the following problem, and submit your Excel...

Create an Excel spreadsheet to organize your answers to the following problem, and submit your Excel file as an attachment by clicking on the appropriate button on this page.

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XYZ Corporation published the following information in its financial statements for its 2018 annual report:

Income Statement Items:

Sales

$76,000

- Cost of goods sold

49,000

Gross profit

27,000

- Cash Operating expenses

$9,000

- Depreciation

2,000

       Total Operating Expenses

11,000

EBIT

16,000

- Interest expense

840

EBT

15,160

- Income tax expense

5,306

Net Income

$9,854

Balance Sheet Items:

Cash   

$9,000

Marketable securities

2,000

Accounts receivable

11,000

Inventories

7,000

Fixed Assets, net

24,000

Total Assets

$53,000

Accounts payable

$8,000

Accrued payables

3,000

Bonds payable

12,000

Common stock

16,000

Retained earnings

14,000

Total Liabilities and Equity

$53,000

  • Sales in 2019 are estimated to be $90,000.
  • $5,000 of the cash operating expenses for 2018 are considered variable costs, and the remainder are fixed costs.
  • Depreciation and the remainder of cash operating expenses are considered to be fixed costs.
  • Cash, accounts receivable, inventories, accounts payable, and accrued payables are considered to be spontaneous items.
  • Marketable securities, net fixed assets, bonds payable, and common stock are discretionary.
  • $5,000 of bonds payable at the end of 2018 are considered "current liabilities," and will be repaid on January 1, 2019. The interest rate on the bonds for 2019 will remain the same as it was in 2018.
  • The company will purchase fixed assets of $3,600 in 2019, but overall depreciation for 2019 will remain the same dollar amount as it was for 2018.
  • The firm paid a dividend of $3,942 in 2018, and will maintain its 2018 dividend payout ratio for 2019.
  • The income tax rate for 2019 is expected to be the same as it was in 2018.

Required:

Prepare the pro-forma 2019 income statement and balance sheet for XYZ Corporation.

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Answer #1
Income Statement
For 2019
($) Calculation
Sales Revenue     90,000
Less: COGS     58,026 =49000*90000/76000
Gross Profit     31,974
Less: Cash Operating Expenses        9,921 =(5000*90000/76000)+4000
Less: Depreciation        2,000
Total Operating Expenses     11,921
EBIT     20,053
Less: Interest expense           490 =(12000-5000)*7%
EBT     19,563
Less: Income Tax expense        6,847 =19563*35%
Net Income     12,716
XYZ Corporation
Balance Sheet
For 2019
($) Calculation
Assets
Current Assets
Cash     15,116 Balancing figure
Marketable Securities        2,000
Accounts Receivables     11,000
Inventories        7,000
Total Current Assets     35,116
Fixed Assets (Net)     25,600 =24000+3600-2000
Total Assets     60,716
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable        8,000
Accrued Payable        3,000
Total Current Liabilities     11,000
Non Current Liabilities
Bond Payable        7,000 =12000-5000
Total Non Current Liabilities        7,000
Shareholders equity
Common Stock     16,000
Retained earnings     26,716 =14000+12716
Total Shareholders equity     42,716
Total liabilities and Shareholders equity     60,716

It has been assumed that Marketable Securities, accounts receivable, inventories, accounts payable, and accrued payables remain the same.

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