Consider the following simplified financial statements for the Fire Corporation
ID: 2626057 • Letter: C
Question
Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes): Income Statement Balance Sheet Sales $ 46,900 Assets $ 22,700 Debt $ 6,700 Costs 41,140 Equity 16,000 Net income $ 5,760 Total $ 22,700 Total $ 22,700 The company has predicted a sales increase of 18 percent. Assume Fire pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not. Prepare the pro forma statements. (Round your answers to the nearest whole dollar amount.) Pro forma income statement Pro forma balance sheet Sales $ Assets $ Debt $ Costs Equity Net income $ Total $ Total $ Determine the external financing needed. (Negative amount should be indicated by a minus sign.) External financing needed $
Explanation / Answer
Net income will be = 5760*1.18 = $ 6797
Retained Earning = 6797*50% = $ 3399
Total Fund Needed = 18%*22700 = $ 4086
Retained Earning = $ 3399
External Financing = 4086 - 3399
External Financing = $ 687
Sales 55,342 Costs 48,545 Net Income 6,797