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 $4.8 million and that 2020 dividends will increase to $246,000. 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 10%. 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. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar. Garlington Technologies Inc. Pro Forma Income Statement December 31, 2020 Sales $ Operating costs $ EBIT $ Interest $ Pre-tax earnings $ Taxes (25%) $ Net income $ Dividends: $ Addition to RE: $ Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2020 Cash $ Receivables $ Inventories $ Total current assets $ Fixed assets $ Total assets $ Accounts payable $ Line of credit $ Accruals $ Total current liabilities $ LT bonds $ Common stock $ Retained earnings $ Total L&E $

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Chapter9: Long-term Liabilities

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Problem 103.1C: Leverage Cook Corporation issued financial statements at December 31, 2019, that include the...

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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 $4.8 million and that 2020 dividends will increase to $246,000. 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 10%. 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. Enter your answers as positive values. Do not round intermediate calculations. Round your answers to the nearest dollar.

Garlington Technologies Inc. Pro Forma Income Statement December 31, 2020
Sales		$
Operating costs		$
EBIT		$
Interest		$
Pre-tax earnings		$
Taxes (25%)		$
Net income		$
Dividends:		$
Addition to RE:		$

Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2020
Cash		$
Receivables		$
Inventories		$
Total current assets		$
Fixed assets		$
Total assets		$
Accounts payable		$
Line of credit		$
Accruals		$
Total current liabilities		$
LT bonds		$
Common stock		$
Retained earnings		$
Total L&E		$

Expert Solution

Step 1

Growth rate in sales = (4.8-4.0)/4.0 =20% (sales figures in Million $)

**Line of credit is the balancing figure and will be calculated last after all balance sheet items is calculated.

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