Question

Consider the following income statement for the Heir Jordan Corporation: 00 Sales HEIR JORDAN CORPORATION Income Statement $46,800 36,200 Costs 12.5 points Taxable income Taxes (35%) $ 10,600 3,710 Net income $ 6,890 eBook Dividends Addition to retained earnings $2,519 4,371 Print References The balance sheet for the Heir Jordan Corporation follows. Assets Current assets Cash Accounts receivable HEIR JORDAN CORPORATION Balance Sheet Liabilities and Owners' Equity Current liabilities $ 2,750 Accounts payable $ 2,400 3,400 Notes payable 5,500 Inventory 9,000 Total $ 7,900 Total $ 15,150 Long-term debt $ 24,000 Fixed assets Owners' equity Common stock and paid-in surplus $38,800 Retained earnings $20,000 Net plant and equipment 2.050 Total $22,050 Total assets $53,950 Total liabilities and owners' equity $53,950 Prepare a pro forma balance sheet, assuming an increase in sales of 12 percent, no new external debt or equity financing, and a constant payout ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Assets Current assets Cash Accounts receivable Inventory Total HEIR JORDAN CORPORATION Pro Forma Balance Sheet Liabilities and Owners' Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners' equity Fixed assets Net plant and equipment Total assets Calculate the EFN. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) EFN

Answer 1

Heir Jordan Corporation

Pro Forma Income Statement

	$
Sales ( $ 46,800 x 1.12)	52,416
Costs ( $ 36,200 x 1.12)	40,544
Taxable Income	11,872
Taxes ( 35 %)	4,155.2
Net Income	7,716.8
Dividends $ ( 2,519 / 6,890 x 7,716.8)	2,821.28
Addition to Retained Earnings	4,895.52

Heir Jordan Corporation

Pro Forma Balance Sheet

Assets	$	Liabilities and Owners' Equity	$
Current Assets		Current Liabilities
Cash	3,080	Accounts Payable	2,688
Accounts Receivable	3,808	Notes Payable	5,500
Inventory	10,080	Total	8,188
Total	16,968	Long-term Debt	24,000
Fixed Assets		Owners' Equity
Net Plant and Equipment	43,456	Common stock and paid-in surplus	20,000
		Retained Earnings	6,945.52
Total Assets	60,424		59,133.52

EFN = $ 59,133.52 - $ 60,424 = - $ 1,290.48