Consider the following simplified financial statements for the Fire Corporation
ID: 2774594 • 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 10 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.)
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
Pro forma income statement Pro forma balance sheet In $ Original Net Income New Net Income Sales $ 50,710 Assets $ $ 26,730 Debt $ $ 6,300 $ 6,470 $ 7,117 Costs $ 43,593 Equity $ 18,000 Retained Earnings $ 3,235 $ 3,559 Retained Earnings $ 324 Dividends $ 3,235 $ 3,559 Net income $ 7,117 Total $ $ 26,730 Total $ $ 24,624 Retained Earnings $ 3,559 External Finance Required $ 2,107 Net Increase in Retained Earnings $ 324 Dividens $ 3,559 Total external Finance Required =$ 324