Question

Consider the following simplified financial statements for the Wims Corporation (assuming no income taxes): Income Statement Balance Sheet Sales $ 38,000 Assets $ 27,300 Debt $ 6,700 Costs 32,600 Equity 20,600 Net income $ 5,400 Total $ 27,300 Total $ 27,300 The company has predicted a sales increase of 15 percent. It has predicted that every item on the balance sheet will increase by 15 percent as well. Create the pro forma statements and reconcile them. (Input all amounts as positive values. Do not round intermediate calculations.) What is the plug variable?

Answer 1

The following are the data inputs in spreadsheet:

The following are the obtained results in spreadsheet:

Answer 2

Sales(38000*1.15)	$43700
Costs(32600*1.15)	$37490
Net income	$6210

Assets(27300*1.15)	$31395	Debt(6700*1.15)	$7705
		Equity(20600*1.15)	$23690
Total	$31395	Total	$31395

Ending equity=Beginning equity+Net income-Dividends

Dividends=(20600+6210-23690)=$3120

Hence plug variable is dividends of the amount of $3120.