year will be $130,000. (2) The firm expects to pay $30,000 in cash dividends. (3) The firm wishes to maintain a minimum cash balance of $25,000. (4) Accounts receivable represent approximately 20% of annual sales. (5) The firm’s ending inventory represents 60% of Cost

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. Barry’s Superstore wishes to prepare financial plans. Use the financial statements on the next page and the other information provided below to prepare the financial plans.

The following financial data are also available:

(1) The firm has estimated that its sales for next year will be $130,000.

(2) The firm expects to pay $30,000 in cash dividends.

(3) The firm wishes to maintain a minimum cash balance of $25,000.

(4) Accounts receivable represent approximately 20% of annual sales.

(5) The firm’s ending inventory represents 60% of Cost of Goods Sold.

(6) A new machine costing $15,000 will be purchased next year.

(7) Accounts payable will increase by 5%.

(8) Unearned Revenue will be earned.

(9) Notes Payable would decrease by $5000.

(10) Short-Term Investments and common stock will remain unchanged.

 

Requirement:

  1. Prepare a pro forma income statement for the year ended December 31, 2021, using the percent-of-sales method. Tax Rate is expected to be 15%.
  2. Prepare a pro forma balance sheet dated December 31, 2021, using the judgmental approach.
  3. Analyze these statements, and discuss the resulting external financing required.
BARRY'S SUPERSTORE
BARRY'S SUPERSTORE
Comparative Year-End Income Statements
Comparative Year-End Balance Sheets
Prior Year
Current Year
Prior Year Current Year
Assets:
Cash
Net Sales
$100,000
$120,000
Cost of Goods Sold
50.000
60,000
$90,000
$110,000
Gross Profit
50,000
60,000
Accounts Receivable
20,000
30,000
35,000
15,000
160,000
40,000
$200.000
Inventory
40,000
5,000
20,000
200.000
50,000
$250.000
Rent Expense
Depreciation Expense
5,500
Short-Term Investments
2.500
3,600
Total Current Asstes
Salaries Expense
Utlity Expense
3,000
5,400
Equipment
Total Assets
1.500
2,500
Operating Income
38,000
43,000
Liabilities:
$ 75.000
25.000
100,000
Accounts Payable
$ 60.000
Interest Expense
3,000
2,000
Unearned Revenue
10.000
Income Tax Expense
70,000
5.000
$ 30,000
6,000
Total Current Liabilities
Net Income
$ 35,000
Notes Payable
Total Liabilities
40,000
110,000
50,000
150.000
Stockholder Equity
Common Stock
75,000
80.000
Ending Retained Earnings
Total Stockholder Equity
Total Liabilities and Stockholder Equity
20.000
100.000
15,000
90,000
$200.000
$250.000
Transcribed Image Text:BARRY'S SUPERSTORE BARRY'S SUPERSTORE Comparative Year-End Income Statements Comparative Year-End Balance Sheets Prior Year Current Year Prior Year Current Year Assets: Cash Net Sales $100,000 $120,000 Cost of Goods Sold 50.000 60,000 $90,000 $110,000 Gross Profit 50,000 60,000 Accounts Receivable 20,000 30,000 35,000 15,000 160,000 40,000 $200.000 Inventory 40,000 5,000 20,000 200.000 50,000 $250.000 Rent Expense Depreciation Expense 5,500 Short-Term Investments 2.500 3,600 Total Current Asstes Salaries Expense Utlity Expense 3,000 5,400 Equipment Total Assets 1.500 2,500 Operating Income 38,000 43,000 Liabilities: $ 75.000 25.000 100,000 Accounts Payable $ 60.000 Interest Expense 3,000 2,000 Unearned Revenue 10.000 Income Tax Expense 70,000 5.000 $ 30,000 6,000 Total Current Liabilities Net Income $ 35,000 Notes Payable Total Liabilities 40,000 110,000 50,000 150.000 Stockholder Equity Common Stock 75,000 80.000 Ending Retained Earnings Total Stockholder Equity Total Liabilities and Stockholder Equity 20.000 100.000 15,000 90,000 $200.000 $250.000
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