Project #40594 - Pro Forma

Pro Forma

Introduction

The intent of this assignment is for you to prepare pro forma financial statements for an organization. This information is important to you because any type of business organization needs to use these statements to project their financial performance. This information is required in order to obtain financing for the business and to be prepared for cash flow needs.

Instructions

For this assignment, you will need to use the information provided below to complete the tables as shown. Assume sales will increase by 30% in 2013. You will need to create your own Word doc or Excel spreadsheet to upload your assignment.

Income Statement

Vector Manufacturing Income Statement

 

2012 Actual

2013 
Pro Forma

Sales revenue

$125,000

 

Less:  Cost of goods sold

   

  Fixed cost

$50,000

 

  Variable cost (40% of sales)

$50,000

 

  Gross Profit

$25,000

 

Less: Operating expenses

   

  Fixed expense

$5,000

 

  Variable expense (5% of sales)

$6,250

 

  Operating profits

$13,750

 

Less:  Interest expense (all fixed)

$1,000

 

   Net profits before taxes

$12,750

 

Less:  Taxes (15% of net profit before taxes)

$1,913

 

  Net profits after taxes

$10,838

 

Balance Sheet

Use the following information and the table below to complete the 2013 balance sheet.
  1. Minimum cash balance of $5,000 is required.
  2. Marketable securities will remain unchanged.
  3. Accounts receivable on average represent 45 days of sales (about 1/8 of year or 12.5%).
  4. Ending inventory will remain unchanged.
  5. A new machine costing $20,000 will be purchased, and total depreciation for the year is $5,000.
  6. Purchases will represent 30% of annual sales.  It will take 75 days to pay the accounts payable, so accounts payable should equal 75 days/365 days or 20.5% of the firm’s purchases.
  7. Taxes payable will equal 25% of the firm’s tax liability as shown on the income statement (see “taxes” on income statement).
  8. Notes payable will be used for additional financing needs (“plug”).
  9. No change in other current liabilities is expected. 
  10. No changes to long-term debt or common stock are expected.
  11. Retained earnings will equal the beginning balance from 2012 plus the 2013 profit (see pro forma income statement).  A $5,000 dividend payment will be made in 2013.

Vector Manufacturing Balance Sheet

 

12/31/12

12/31/13

Assets

   

Cash

$5,000

 

Marketable securities

$4,000

 

Accounts receivable

$12,000

 

Inventories

$15,000

 

  Total current assets

$36,000

 

Net fixed assets

$50,000

 

  Total assets

$86,000

 
     

Liabilities and Stockholders' Equity

   

Accounts payable

$6,000

 

Taxes payable

$500

 

Notes payable

$6,500

 

Other current liabilities

$3,000

 

  Total current liabilities

$16,000

 

Long-term debt

$15,000

 

  Total liabilities

$31,000

 

Common stock

$35,000

 

Retained earnings

$20,000

 

  Total liabilities and stockholders' equity

$86,000

 

Grading

This assignment is worth 30 points, 15 points each for the Income Statement and Balance Sheet.

Submission

Use the upload button below to submit a Word doc or Excel spreadsheet that includes both the Income Statement and the Balance Sheet.

Subject Philosophy
Due By (Pacific Time) 09/21/2014 06:00 pm
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