Question

Pro forma balance sheet-Basic Leonard Industries wishes to prepare a pro forma balance sheet for December 31, 2020. The firm expects 2020 sales to total $3,000,000. The following information has been gathered. (1) A minimum cash balance of $49,500 is desired. (2) Marketable securities are expected to remain unchanged. B) Accounts receivable represent 10.1% of sales. (4) Inventories represent 12.1% of sales. (5) A new machine costing $90,200 will be acquired during 2020. Total depreciation for the year will be $32,100. (6) Accounts payable represent 14.2% of sales. 7) Accruals, other current liabilities, long-term debt, and common stock are expected to remain unchanged. (8) The firm's net profit margin is 4.2%, and it expects to pay out $69,500 in cash dividends during 2020. (9) The December 31, 2019, balance sheet follows B.

Answer 1

Hi,

Below is the proforma Balance sheet of Lenoard industries dated 31st december 2020.

assuming total sales for FY20 will be 30,00,000, Accounts receivable, inventory and accounts payable have been calculated as a percentage of total sales as mentioned in the question.

New machinery purchased and its depreciation have been added and subtracted respectively from net fixed assets.

Profit of 4.2% of sales has been added to retained earnings and the expected dividend amount has been subtracted from the same. After making all the adjustments, total assets is $13,88,400 and total liabilities is $13,41,900.

B. Thus, additional financing of $46,500 will be required by Leonard industries.

C. If Lenoard industries reduces the dividend amount by 46,500, the additional financing will not be required.

A.

Cash	49500		Accounts Payable	=3000000*14.2/100
Marketable Securities	14800		Accruals	59600
Account Receivable	=3000000*10.1/100		Other current liabilities	30500
Inventories	=3000000*12.1/100		Total current liability	516100
Total current assets	730300		Long term debt	349400
Fixed asset	=600000+90200-32100		Common stock	200300
			Retained earnings	=219600+(4.2/100*3000000)-69500
Total asset	1388400		Total liabilties	1341900