Provincial Imports, Inc., has assembled last year's financial statements (income statement and balance sheetLOADING...)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$998,000in fixed costs.(3) Operating expense last year includes$246,000in fixed costs.(4) Interest expense will remain unchanged.(5) The firm will pay cash dividends amounting to35%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$364,000will be purchased during the year. Total depreciation expense for the year will be$116,000.(10) The tax rate will remain at40%.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. 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 tablePro Forma Income StatementProvincial Imports, Inc.for Next YearProvincial Imports, Inc. Income Statementfor the Year Just Ended(percent-of-sales method)Sales revenue$5,006,000Sales$6,006,000Less: Cost of goods soldGross profitsLess: Operating expenses2,741,000Less: Cost of goods sold3,089,182$2,265,000855,000Gross profits2,916,818$1,410,000Operating profitsLess: Interest expenseLess: Operating expenses201,000Net profits before taxesLess: Taxes (rate = 40%)Operating profits$$1,209,000483,600Less: Interest expenseNet profits after taxes$725,400Net profits before taxesLess: Cash dividends253,890Less: Taxes (rate = 40%)To retained earnings$471,510%3DNet profits after taxes(Click on the icon herein order to copy the contents of the data table below into a spreadsheet.)Less: Cash dividends (35%)365,229Provincial Imports, Inc. Balance Sheetfor the Year Just EndedTo Retained earningsAssetsLiabilities and Stockholders' EquityAccounts payableTaxes payableCash$190,000$700,000Marketable securities230,00095,000%24 Data table$1,410,000Operating profitsLess: Interest expense201,000Net profits before taxes$1,209,000Less: Taxes (rate = 40%)483,600Net profits after taxes$725,400Less: Cash dividends253,890To retained earnings$471,510(Click on the icon herein order to copy the contents of the data table below into a spreadsheet.)Provincial Imports, Inc. Balance Sheetfor the Year Just EndedAssetsLiabilities and Stockholders' EquityAccounts payableTaxes payableNotes payableCash$190,000$700,000Marketable securities230,00095,000Accounts receivable635,000205,000Inventories508,000Other current liabilities4,800Total current assets$1,563,000Total current liabilities$1,004,800Net fixed assets1,408,000Long-term debt512,200Common stock77,000Retained earnings1,377,000Total assets$2,971,000Total liabilities and equity$2,971,000

Pro forma income statement : A pro forma income statement is a financial statement that shows a…

Answered: Provincial Imports, Inc., has…

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

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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.

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.

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

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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