Bill Inc.'s last year financial statements are shown below:Bill Inc. Balance Sheet as of December 31Cash $ 90,000 Accounts payable $ 180,000Receivables 180,000 Notes payable 78,000Inventory 360,000 Accruals 90,000Total current assets $630,000 Total current liabilities $ 348,000 Common stock 900,000Net fixed assets 720,000 Retained earnings 102,000Total assets $1,350,000 Total liabilities and equity $1,350,000 Bill Inc. Income Statement for December 31Sales $1,800,000Operating costs 1,639,860EBIT $ 160,140Interest 10,140EBT $ 150,000Taxes (40%) 60,000Net income $90,000 Dividends (60%) $ 54,000Addition to retained earnings $ 36,000Suppose that next year's sales will increase by 20 percent over last year's sales. Construct the pro forma financial statements using the percent of sales method. Assume the firm operated at full capacity last year. How much additional capital will be required?

The entity needs an additional capital amount for supporting a 20% increase in sales amount. This…

Answered: Bill Inc.'s last year financial…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 17E

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Bill Inc.'s last year financial statements are shown below:

Bill Inc. Balance Sheet as of December 31

Cash	$ 90,000	Accounts payable	$ 180,000
Receivables	180,000	Notes payable	78,000
Inventory	360,000	Accruals	90,000
Total current assets	$630,000	Total current liabilities	$ 348,000
		Common stock	900,000
Net fixed assets	720,000	Retained earnings	102,000
Total assets	$1,350,000	Total liabilities and equity	$1,350,000

Bill Inc. Income Statement for December 31

Sales		$1,800,000
Operating costs		1,639,860
EBIT		$ 160,140
Interest		10,140
EBT		$ 150,000
Taxes (40%)		60,000
Net income		$90,000

Dividends (60%)		$ 54,000
Addition to retained earnings		$ 36,000

Suppose that next year's sales will increase by 20 percent over last year's sales. Construct the pro forma financial statements using the percent of sales method. Assume the firm operated at full capacity last year. How much additional capital will be required?

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