Proforma Financial Statements for Stevens Textiles
Not what you're looking for?
This problem requires creating a pro-forma balance sheet to come up with the answers. I have placed the answers from the back of the book in the spreadsheet, but I don't know how to come up with them (i.e. create the sheet).
Stevens Textile's 2004 financial statements are shown below.
Stevens Textile's: Balance sheet as of December 31, 2004
(Thousands of Dollars)
Cash $1,080 Accounts Payable $4,320
Receivables $6,480 Accrurals $2,880
Inventories $9,000 Notes Payable $2,100
Total current assets $16,560 Total current liabilities $9,300
Net fixed assets $12,600 Mortgage bonds $3,500
Common stock $3,500
Total assets $29,160 Retained earnings $12,860
Total liabilities and equity $29,160
Stevens Textile's: Income Statement as of December 31, 2004
(Thousands of Dollars)
Sales $36,000
Operating Costs $32,440
Earnings before Interest $3,560
Interest $460
Earnings before taxes $3,100
Taxes $1,240
Net Income $1,860
Dividends $837
Addition to retained earnings $1,023
Suppose 2005 sales are projected to increase by 15 percent over 2004 sales. Determine the additional funds needed.
Assume that the company was operating at full capacity in 2004, that it cannot sell off any of its fixt assets, and that any
required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are
expected to increase by the same percentage as sales. Use the percent of sales method to develop a pro forma balance sheet
and income statement for December 31, 2005. Use an interest rate of 10 percent on the balance debt at the beginning of the year
to compute interest (cash pays no interest). Use the pro forma income statement to determine the addition to retained earnings.
Purchase this Solution
Solution Summary
The solution explains how the prepare proforma financial statements using the percentage of sales method
Solution Preview
In solving such a problem, the steps are
1. Get the expenses as a % of sale. Operating costs are 90% of sale.
2. Make the profirma income statement - increase sales by 15%. Operating costs are 90% of the new sales value.
3. Interest is given as 10% of the opening debt. Add up notes payable and mortgage bonds. 10% of ...
Purchase this Solution
Free BrainMass Quizzes
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Situational Leadership
This quiz will help you better understand Situational Leadership and its theories.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.