Financial Deficit Garlington Technologies Inc.'s 2019 financial statements are shown below:
Income Statement for December 31, 2019
Sales $4,000,000
Operating costs 3,200,000
EBIT $800,000
Interest 120,000
Pre-tax earnings $680,000
Taxes (25%) 170,000
Net income 510,000
Dividends $190,000
Balance Sheet as of December 31, 2019
Cash $160,000 Accounts payable $360,000
Receivables 360,000 Line of credit 0
Inventories 720,000 Accruals 200,000
Total CA $1,240,000 Total CL $560,000
Fixed assets 4,000,000 Long-term bonds 1,000,000
Total Assets $5,240,000 Common stock 1,100,000
RE 2,580,000
Total L&E $5,240,000
Suppose that in 2020 sales increase to $4.2 million and that 2020 dividends will increase to $228,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2019. The long-term bonds have an interest rate of 14%. New financing will be with a line of credit. Assume it will be added at the end of the year. Cash does not earn any interest income.