Module 6 Assignment - Pro Forma Income Statement and Balance
Question # 00844394
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Updated on: 08/06/2023 08:53 PM Due on: 08/07/2023
Module 6 - Finance
Pro Forma
| Pro Forma Income Statement and Balance Sheet | |||||||
| Below is the income statement and balance sheet for Blue Bill Corporation for 2020. Based on the historical statements and the | |||||||
| additional information provided, construct the firm's pro forma income statement and balance sheet for 2021. | |||||||
| Blue Bill Corporation | |||||||
| Income Statement | |||||||
| For the year ended 2020 | Projected | ||||||
| 2019 | 2020 | 2021 | |||||
| Revenue | $60,000 | $63,000 | |||||
| Cost of goods sold | 42,000 | 44,100 | |||||
| Gross margin | 18,000 | 18,900 | |||||
| SG&A expense | 6,000 | 6,300 | |||||
| Depreciation expense | 1,800 | 2,000 | |||||
| Earnings Before Interest and Taxes (EBIT) | 10,200 | 10,600 | |||||
| Interest expense | 1,500 | 1,800 | |||||
| Taxable income | 8,700 | 8,800 | |||||
| Income Tax Expense | 3,045 | 3,080 | |||||
| Net income | 5,655 | 5,720 | |||||
| Dividends | 750 | 800 | |||||
| To retained earnings | $4,905 | $4,920 | |||||
| Additional income statement information: | |||||||
| Sales will increase by 5% in 2021 from 2020 levels. | 5% | ||||||
| COGS and SG&A will be the average percent of sales for the last 2 years. | Revenues | $123,000 | |||||
| Depreciation expense will increase to $2,200. | $2,200 | COGS | 86,100 | ||||
| Interest expense will be $1,900. | $1,900 | COGS % | |||||
| The tax rate is 35%. | 35% | SG&A | 12,300 | ||||
| Dividend payout will increase to $850. | $850 | SG&A % | |||||
| Blue Bill Corporation | |||||||
| Balance Sheet | |||||||
| December 31, 2020 | Projected | ||||||
| 2020 | 2021 | ||||||
| Current assets | |||||||
| Cash | $8,000 | ||||||
| Accounts receivable | 3,150 | 5.0% | |||||
| Inventory | 9,450 | 15.0% | |||||
| Total current assets | 20,600 | ||||||
| Property, plant, and equipment (PP&E) | 28,500 | ||||||
| Accumulated depreciation | 16,400 | ||||||
| Net PP&E | 12,100 | ||||||
| Total assets | $32,700 | ||||||
| Current liabilities | |||||||
| Accounts payable | $3,780 | 6.0% | |||||
| Bank loan (10%) | 3,200 | ||||||
| Other current liabilities | 1,250 | 3.0% | |||||
| Total current liabilities | 8,230 | ||||||
| Long-term debt (12%) | 4,800 | ||||||
| Common stock | 1,250 | ||||||
| Retained earnings | 18,420 | ||||||
| Total liabilities and equity | $32,700 | ||||||
| Additional balance sheet information: | |||||||
| The minimum cash balance is 10% of sales in 2021. | 10% | ||||||
| Working capital accounts (accounts receivable, accounts payable, and inventory) will be the same percent of sales in 2021 as they were in 2020. | |||||||
| $8,350 of new PP&E will be purchased in 2021. | $8,350 | ||||||
| Other current liabilities will be 3% of sales in 2021. | 3% | ||||||
| There will be no changes in the common stock or long-term debt accounts. | |||||||
| The plug figure (the last number entered that makes the balance sheet balance) is bank loan. |
Cash Budget
| Cash Budget | |||||||
| Sales for Blue Bill Corporation are projected as follows for the months of June through November: | |||||||
| June | $200,000 | ||||||
| July | $200,000 | ||||||
| August | $200,000 | ||||||
| September | $300,000 | ||||||
| October | $500,000 | ||||||
| November | $200,000 | ||||||
| Credit sales account for 70% of the month sales and are collected one month after the sale. | 70% | 30% | |||||
| Other receipts for October are $50,000. | $50,000 | ||||||
| Variable disbursements are 60% of sales each month. | 60% | ||||||
| Fixed disbursements are $10,000 each month. | $10,000 | ||||||
| $80,000 should be included in August for taxes. | $80,000 | ||||||
| The company is obligated to make a $400,000 debt repayment in November. | $400,000 | ||||||
| Beginning cash in June is $50,000. | $50,000 | ||||||
| Desired ending cash each month is $10,000. | $10,000 | ||||||
| Complete the monthly cash budget for Blue Bill Corporation for June through November. | |||||||
| Blue Bill Corporation | |||||||
| Cash Budget | |||||||
| June | July | August | September | October | November | ||
| Sales | |||||||
| Cash sales | |||||||
| Collections | |||||||
| Other Receipts | |||||||
| Total cash receipts | |||||||
| Variable disbursements | |||||||
| Fixed disbursements | |||||||
| Other disbursements | |||||||
| Total cash disbursements | |||||||
| Net change during the month | |||||||
| Beginning cash | |||||||
| Ending cash | |||||||
| Required cash | |||||||
| Excess cash to invest | |||||||
| Cash borrowed |
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Rating:
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Solution: Module 6 Assignment - Pro Forma Income Statement and Balance