Proforma: Generally Accepted Accounting Principles and Judgmental Approach

Thirdly, since the total fixed costs account for 14.1% of its sales in the year of 1983 and 1984, we assume the total fixed costs will remain at this level until 1989. Similarly, the account receivable, account payable, and inventories stays at 10%, 5.5% and 4.5% of sales respectively.

This answer can be done in tabular form as well, with the interest on inventory appearing as a new column. If one order is placed a year, the average inventory is 1,000 kegs, worth $40,000, with annual interest charges (1.5 x 12 = 18%) of $7,200. Other interest costs are calculated in a similar fashion, adjusted for average inventory.

Cost of inventory is determined using the average method; inventory is stated at the lower of cost or market. +pB13

Pro forma is similar in many ways to a historical income statement; however, it projects the future rather than tracking the past. I used the pro forma statements a lot in determining growth decisions to see what the financial effects would be in the future. In Quarter 4 they were very useful because I wanted to increase my sales force from 14 sales people to 24 sales people.

330-10-30330-10-30-1 The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location. It is understood to mean acquisition and production cost, and its determination involves many considerations. 330-10-30330-10-30-2 Although principles for the determination of inventory costs may be easily stated, their application, particularly to such inventory items as work in process and finished goods, is difficult because of the variety of considerations in the allocation of costs and charges.

Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost

This will be a basic forecast created from pro-forma financial statements, using basic forecasting procedures.

Pro-Forma Financial Statements (I/S, B/S and Statement of Cash Flows) with deltas out three years and analysis

(b) Calculate by how much the proposed addition will either increase or reduce operating income. Show all work.

Pro-forma income statement to illustrate interest and dividend payment ability is based on various assumptions as shown in Exhibit 1. Expected cases are the measures used in the following discussion. Conservatism is adopted throughout the assumptions especially sales growth rate, credit rating and Medicaid penalty assumptions.

6. A pro forma income statement analysis that includes a forecast of revenue for the coming year, major cost and expense categories, earnings, earnings per share, and dividends. Rely on your own forecast. Do not base your analysis on a sales or earnings forecast from a secondary source such as Value Line.

11. Accounts receivable turnover and days sales in accounts receivable for the last three years:

which are added to pro forma total current assets which yield pro forma total assets. The next section deals with liability. It begins with pro forma accounts payable which is determined by figuring out how much a company will spend on bills and previous purchased supplies. Next is the pro forma accrued payroll, which is easy to determine after establishing salaries. The pro forma notes payable is notes payable within one year. Pro forma total current liabilities are calculated by adding pro forma accounts payable, accrued payroll, and notes payable. Proceeding this, pro forma long term liabilities are calculated which may include things such as pro forma mortgage note payable. Combining pro forma long term liabilities and pro forma current liabilities will provide pro forma total liabilities. The last section of the pro forma balance sheet is pro forma owner’s equity, which includes pro forma common stock and pro forma retained earnings.

Then, divide the accounts receivable by average sales per day to determine the number of days of sales that are still unpaid:

Each user of the financial statements interprets the information in a different manor. They use the information to determine their interactions with the organization. Management, investors, and employees use the same information from the financial statements but for different purposes. These four basic statements are the fundamentals of accounting which can be much more detail and complex. They do not need to be more complex for the users of the information; these basic statements have all the information needed to make