Consider the following simplified financial statements for the Fire Corporation
ID: 2645035 • Letter: C
Question
Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes):
The company has predicted a sales increase of 20 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.)
Determine the external financing needed. (Negative amount should be indicated by a minus sign.)
Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes):
Explanation / Answer
Income Statement Balance Sheet Sales 39600 Assets 28560 Debt 6800 Less: Cost 31800 (23800+20%) Equity 17000 Net Income 7800 Retained Earnings 4680 Projected Income Statement 28560 28480 Sales Difference 80 (Sales+20%) 47520 (There is some item that is missing, for that there is a Less: Cost difference of 80 in the balance sheet) (Cost+20%) 38160 Net Income 9360 Less: Dividend (1/2 of Net Income) 4680 Retained Income 4680