Question

S04-01 Pro Forma Statements [LO1] Consider the following simplified financial statements for the Wims Corporation (assuming no income taxes) Income Statement Sales $38,000 Balance Sheet Assets $27,300 Debt 6,700 Equity 20,600 Costs 32,600 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.) Pro forma income statement Pro forma balance sheet Sales Costs Net income Assets Debt Equity Total Total What is the plug variable? The plug variable is in the amount of

Answer 1

Proforma income statement
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

23690=20600+6210-Dividends

Dividends=(20600+6210-23690)

=$3120.

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