Homework Soursea Prepare a pro forma balance sheet dated December 31 2017 b
a. Prepare a pro forma balance sheet dated December? 31, 2017.
b. Discuss the financing changes suggested by the statement prepared in part
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Pro forma balance sheet Peabody & Peabody has 2015 sales of $10.5 million. It wishes to analyze expected performance and financing needs for 2017-2 years ahead. Given the following information, respond to parts a. and b (1) The percents of sales for items that vary directly with sales are as follows: Accounts receivable, 12.5%, Inventory: 18.1%; Accounts payable, 13.6%; Net profit margin, 3.1% (2) Marketable securities and other current liabilities are expected to remain unchanged (3) A minimum cash balance of $477,000 is desired (4) A new machine costing $651,000 will be acquired in 2016, and equipment costing $848,000 will be purchased in 2017. Total depreciation in 2016 is forecast as $295,000, and in 2017 $388,000 of depreciation will be taken (5) Accruals are expected to rise to $499,000 by the end of 2017 (6) No sale or retirement of long-term debt is expected. (7) No sale or repurchase of common stock is expected (8) The dividend payout of 50% of net profits is expected to continue (9) Sales are expected to be $11.7 million in 2016 and $11.3 million in 2017Solution
a.
b. The increased financing could be met by utilising retained earnings. Here inn this case it is $181,350 in 2016 and $175,150 in 2017. The balancing amount of $643,500 is raised through bank loan.
| Peabody & Peabody (Pro forma) Balance sheet December 31 2017 ($ 000) | |||
| Assets | Liability and stockholder\'s equity | ||
| Cash | 477 | Accounts Payable | 1536.8 |
| Marketable securities | 201 | Accruals | 499 |
| Accounts Receivable | 1299.5 | Other current liability | 79.7 |
| Inventories | 2045.3 | ||
| Total current Asset | 4022.8 | Total current Liability | 2115.5 |
| Net Fixed Assets | 4820 | Long term Debt | 2003.3 |
| Bank Loan/debt(Additional fund required(Balancing figure | 643.5 | ||
| Total Liabilities | 4762.3 | ||
| Common Equity & retained earning | 4080.5 | ||
| Total Assets | 8842.8 | Total Liabilities and stockholder\'s equity | 8842.8 |
