Provincial Imports, Inc., has assembled last year's financial statements (income statement and balance sheet LOADING... ) and financial projections for use in preparing financial plans for the coming year. Information related to financial projections for next year is as follows: (1) Projected sales are $6,006,000. (2) Cost of goods sold last year includes $998,000 in fixed costs. (3) Operating expense last year includes $246,000 in fixed costs. (4) Interest expense will remain unchanged. (5) The firm will pay cash dividends amounting to 35% of net profits after taxes. (6) Cash and inventories will double. (7) Marketable securities, notes payable, long-term debt, and common stock will remain unchanged. (8) Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales. (9) A new computer system costing $364,000 will be purchased during the year. Total depreciation expense for the year will be $116,000. (10) The tax rate will remain at 40%. a. Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent-of-sales method.
Provincial Imports, Inc., has assembled last year's financial statements (income statement and balance sheet LOADING... ) and financial projections for use in preparing financial plans for the coming year. Information related to financial projections for next year is as follows: (1) Projected sales are $6,006,000. (2) Cost of goods sold last year includes $998,000 in fixed costs. (3) Operating expense last year includes $246,000 in fixed costs. (4) Interest expense will remain unchanged. (5) The firm will pay cash dividends amounting to 35% of net profits after taxes. (6) Cash and inventories will double. (7) Marketable securities, notes payable, long-term debt, and common stock will remain unchanged. (8) Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales. (9) A new computer system costing $364,000 will be purchased during the year. Total depreciation expense for the year will be $116,000. (10) The tax rate will remain at 40%. a. Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent-of-sales method.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Provincial Imports, Inc., has assembled last year's financial statements (income statement and balance sheet
and financial projections for use in preparing financial plans for the coming year.
LOADING...
)Information related to financial projections for next year is as follows:
(1) Projected sales are
$6,006,000.
(2) Cost of goods sold last year includes
$998,000
in fixed costs.(3) Operating expense last year includes
$246,000
in fixed costs.(4) Interest expense will remain unchanged.
(5) The firm will pay cash dividends amounting to
35%
of net profits after taxes.(6) Cash and inventories will double.
(7) Marketable securities, notes payable, long-term debt, and common stock will remain unchanged.
(8) Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales.
(9) A new computer system costing
depreciation expense for the year will be
$364,000
will be purchased during the year. Total $116,000.
(10) The tax rate will remain at
40%.
a. Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent-of-sales method.
Transcribed Image Text:a. Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent-of-sales method.
Complete the pro forma income statement for next year below: (Round to the nearest dollar.)
Data table
Pro Forma Income Statement
Provincial Imports, Inc.
for Next Year
Provincial Imports, Inc. Income Statement
for the Year Just Ended
(percent-of-sales method)
Sales revenue
$5,006,000
Sales
$
6,006,000
Less: Cost of goods sold
Gross profits
Less: Operating expenses
2,741,000
Less: Cost of goods sold
3,089,182
$2,265,000
855,000
Gross profits
2,916,818
$1,410,000
Operating profits
Less: Interest expense
Less: Operating expenses
201,000
Net profits before taxes
Less: Taxes (rate = 40%)
Operating profits
$
$1,209,000
483,600
Less: Interest expense
Net profits after taxes
$725,400
Net profits before taxes
Less: Cash dividends
253,890
Less: Taxes (rate = 40%)
To retained earnings
$471,510
%3D
Net profits after taxes
(Click on the icon here
in order to copy the contents of the data table below into a spreadsheet.)
Less: Cash dividends (35%)
365,229
Provincial Imports, Inc. Balance Sheet
for the Year Just Ended
To Retained earnings
Assets
Liabilities and Stockholders' Equity
Accounts payable
Taxes payable
Cash
$190,000
$700,000
Marketable securities
230,000
95,000
%24
Transcribed Image Text:Data table
$1,410,000
Operating profits
Less: Interest expense
201,000
Net profits before taxes
$1,209,000
Less: Taxes (rate = 40%)
483,600
Net profits after taxes
$725,400
Less: Cash dividends
253,890
To retained earnings
$471,510
(Click on the icon here
in order to copy the contents of the data table below into a spreadsheet.)
Provincial Imports, Inc. Balance Sheet
for the Year Just Ended
Assets
Liabilities and Stockholders' Equity
Accounts payable
Taxes payable
Notes payable
Cash
$190,000
$700,000
Marketable securities
230,000
95,000
Accounts receivable
635,000
205,000
Inventories
508,000
Other current liabilities
4,800
Total current assets
$1,563,000
Total current liabilities
$1,004,800
Net fixed assets
1,408,000
Long-term debt
512,200
Common stock
77,000
Retained earnings
1,377,000
Total assets
$2,971,000
Total liabilities and equity
$2,971,000
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