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Q1) Pro Forma balance sheet--Peabody and Peabody has 2006 sales of $10million. It wants to analyze expected performance and financing needs for 2008-2 years ahead. Provided following information, respond to parts A and B.

 

(1) Percents of sales for items which differ directly with sales are as follows:

a. Accounts receivable, 12%
b. Inventory, 18%
c. Accounts payable, 14%
d. Net profit margin, 3%

(2) Marketable securities and other current liabilities are expected to remain unchanged.

(3) Minimum cash balance of $480,000 is desired.

(4) New machine costing $650,000 will be required in 2007, and equipment costing $850,000 will be bought in 2008. Total depreciation in 2007 is forecast as $290,000, and in 2008 $390,000 of deprecation will be taken.

(5) Accruals are expected to rise to $500,000 by end of 2008.

(6) No sale or retirement of long-term debt is expected

(7) No sale or repurchase of common stock is expected.

(8) The dividend payout of 50% of net profits is expected to continue.

(9) Sales are expected to be $11 million in 2007 and $12 million in 2008.

(10) December 31, 2008 balance sheet is listed below

Peabody & Peabody
Balance Sheet
31-Dec-06 $ in (000)
Assets   Liabilities & Stockholders' Equity  
Cash $400 Accounts payable $1,400
Marketable securities     $200 Accruals 400
Accounts receivable      1200 Other Current Liabilities                     80
Inventories 1800 Total Current Liabilities                     $1,880
Total current Assets      $3,600 Long term Debt $2,000
Net fixed assets           4000 Common equity $3,720
Total assets $7,600 Total Liabilities & stockholders' equity  $7,600

A. Create pro forma balance sheet dated December 31, 2008

B. Describe the financing changes suggested by statement prepared in part A

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  • Category:- Accounting Basics
  • Reference No.:- M920915

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