Garlington Technologies Inc.'s 2019 financial statements are shown below:Income Statement for December 31, 2019Sales$4,000,000Operating costs3,200,000 EBIT$ 800,000Interest120,000 Pre-tax earnings$ 680,000Taxes (25%)170,000Net income510,000Dividends$ 190,000Balance Sheet as of December 31, 2019Cash$ 160,000 Accounts payable$ 360,000Receivables360,000 Line of credit0Inventories720,000 Accruals200,000 Total CA$1,240,000 Total CL$ 560,000Fixed assets4,000,000 Long-term bonds1,000,000 Total Assets$5,240,000 Common stock1,100,000 RE2,580,000 Total L&E$5,240,000Suppose that in 2020 sales increase to $4.2 million and that 2020 dividends will increase to $226,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2019. The long-term bonds have an interest rate of 14%. New financing will be with a line of credit. Assume it will be added at the end of the year. Cash does not earn any interest income. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar.

Garlington Technologies Inc.Pro Forma Income StatementDecember 31, 2019 Sales $4,200,000…

Answered: ales $4,000,000 Operating costs…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Garlington Technologies Inc.'s 2019 financial statements are shown below:

Income Statement for December 31, 2019

Sales	$4,000,000
Operating costs	3,200,000
EBIT	$ 800,000
Interest	120,000
Pre-tax earnings	$ 680,000
Taxes (25%)	170,000
Net income	510,000
Dividends	$ 190,000

Balance Sheet as of December 31, 2019

Cash	$ 160,000	Accounts payable	$ 360,000
Receivables	360,000	Line of credit	0
Inventories	720,000	Accruals	200,000
Total CA	$1,240,000	Total CL	$ 560,000
Fixed assets	4,000,000	Long-term bonds	1,000,000
Total Assets	$5,240,000	Common stock	1,100,000
		RE	2,580,000
		Total L&E	$5,240,000

Suppose that in 2020 sales increase to $4.2 million and that 2020 dividends will increase to $226,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2019. The long-term bonds have an interest rate of 14%. New financing will be with a line of credit. Assume it will be added at the end of the year. Cash does not earn any interest income. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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