Homework Sourse68 The balance sheet of Free Enterprises Inc at the end of 2
6.8 The balance sheet of Free Enterprises, Inc., at the end of 2015 follows. Free Enterprises, Inc. Balance Sheet, Dec. 31, 2015 (Thousands of Dollars) Assets Liabilities + Equity Cash Accounts Receivable Inventory Prepaid Expenses Total Current Assets Fixed Assets Total Assets S 4,000 Accounts Payable4,400 4,000 5,000 400 Total Current Liabilities 13,400 6,000 19,000 Total Liabilities and Equity $ 38,400 Notes Payable 10,000 13,000 Accrued Expenses 27,400 11,000 Bonds Payable Common Equity $ 38,400 Net sales for 2015 were $85,000,000. The average annual sales growth rate is expected to be 10 percent every year for the next three years. Over the past several years the earnings before taxes (EBT) were 11 percent of net sales and are expected to remain the same over the next three years. The company\'s tax rate is 40 percent, and it plans to maintain the dividend payout ratio (dividends paid/net income) at 60 percent. Prepare a pro forma balance sheet for Free Enterprises, Inc., for December 31, 2016. Assume the accounts that are not a function of sales (fixed assets and bonds payable) remain the same as they were in 2015. Current assets and current liabilities will remain the same percentage of sales as in 2015. Assume the only change to common equity is for the addition to retained earnings.
Solution
Solution:
| Free Enterprises | |||||
| Proforma Balance Sheet - Dec 31, 2016 | |||||
| (Thousand of Dollars) | |||||
| Assets | 2015 | 2016 | Liabilities & Equity | 2015 | 2016 |
| Cash (110% of 2015) | $4,000.00 | $4,400.00 | Accounts Payable (110% of 2015) | $4,400.00 | $4,840.00 |
| Accounts Receivables (110% of 2015) | $10,000.00 | $11,000.00 | Notes Payable (110% of 2015) | $4,000.00 | $4,400.00 |
| Inventory (110% of 2015) | $13,000.00 | $14,300.00 | Accured Expenses (110% of 2015) | $5,000.00 | $5,500.00 |
| Prepaid Expenses (110% of 2015) | $400.00 | $440.00 | |||
| Total Current Liabilities (110% of 2015) | $13,400.00 | $14,740.00 | |||
| Total Current Assets (110% of 2015) | $27,400.00 | $30,140.00 | |||
| Bonds Payable | $6,000.00 | $6,000.00 | |||
| Fixed Assets | $11,000.00 | $11,000.00 | Common Equity | $19,000.00 | $20,400.00 |
| Total Assets | $38,400.00 | $41,140.00 | Total Liabilities | $38,400.00 | $41,140.00 |
