Pro forma balance sheet peabody & peabody has 2019 sales of $ 10.4 million. it wishes to analyze expected performance and financing needs for 2021long dash2 years ahead. given the following information, respond to parts a. and b.
(1) the percents of sales for items that vary directly with sales are as follows:
accounts receivable; 11.3 %,
inventory; 18.8 %;
accounts payable, 14.7 %;
net profit margin, 4.0 %.
(2) marketable securities and other current liabilities are expected to remain unchanged.
(3) a minimum cash balance of $ 485,000 is desired.
(4) a new machine costing $ 646,000 will be acquired in 2020, and equipment costing $ 852,000 will be purchased in 2021. total depreciation in 2020 is forecast as $ 287,000, and in 2021 $ 394,000 of depreciation will be taken.
(5) accruals are expected to rise to $ 495,000 by the end of 2021.
(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 $ 11.5 million in 2020 and $ 13.0 million in 2021.
(10) the december 31, 2019, balance sheet is here:
peabody & peabody balance sheet december 31, 2019
assets: cash $400market securities 200accounts recievable 1,200inventories 1,800total current assets 3,600net fixed assets 4,000total assets $7,600liabilities and stockholders' equity: accounts payable $ 1,400accruals 400
other current liabilities 80total current liabilities $1,880long term debt 2,000total liabilities 3,880common equity 3,720total liabilities and stockholders' equity: $7,600
required:
a. prepare a pro forma balance sheet dated december 31, 2021.
b. discuss the financing changes suggested by the statement prepared in part (a).