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Provincial​ Imports, Inc., has assembled last​ year's financial statements​ (income statement and balance sheet LOADING... ​) and financial projections for use in preparing financial plans for the coming year. Information related to financial projections for next year is as​ follows: ​(1) Projected sales are $6,006,000. ​(2) Cost of goods sold last year includes $998,000 in fixed costs. ​(3) Operating expense last year includes $246,000 in fixed costs. ​(4) Interest expense will remain unchanged. ​(5) The firm will pay cash dividends amounting to 35% of net profits after taxes. ​(6) Cash and inventories will double. ​(7) Marketable​ securities, notes​ payable, long-term​ debt, and common stock will remain unchanged. ​(8) Accounts​ receivable, accounts​ payable, and other current liabilities will change in direct response to the change in sales. ​(9) A new computer system costing $364,000 will be purchased during the year. Total depreciation expense for the year will be $116,000. ​(10) The tax rate will remain at 40%. a. Prepare a pro forma income statement for next​ year, using the fixed cost data given to improve the accuracy of the​ percent-of-sales method.

Provincial​ Imports, Inc., has assembled last​ year's financial statements​ (income statement and balance sheet LOADING... ​) and financial projections for use in preparing financial plans for the coming year. Information related to financial projections for next year is as​ follows: ​(1) Projected sales are $6,006,000. ​(2) Cost of goods sold last year includes $998,000 in fixed costs. ​(3) Operating expense last year includes $246,000 in fixed costs. ​(4) Interest expense will remain unchanged. ​(5) The firm will pay cash dividends amounting to 35% of net profits after taxes. ​(6) Cash and inventories will double. ​(7) Marketable​ securities, notes​ payable, long-term​ debt, and common stock will remain unchanged. ​(8) Accounts​ receivable, accounts​ payable, and other current liabilities will change in direct response to the change in sales. ​(9) A new computer system costing $364,000 will be purchased during the year. Total depreciation expense for the year will be $116,000. ​(10) The tax rate will remain at 40%. a. Prepare a pro forma income statement for next​ year, using the fixed cost data given to improve the accuracy of the​ percent-of-sales method.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 32P: More-Power Company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for next...
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 Provincial​ Imports, Inc., has assembled last​ year's financial statements​ (income statement and balance sheet
LOADING...
​)
and financial projections for use in preparing financial plans for the coming year.
Information related to financial projections for next year is as​ follows:
​(1) Projected sales are
$6,006,000.
​(2) Cost of goods sold last year includes
$998,000
in fixed costs.
​(3) Operating expense last year includes
$246,000
in fixed costs.
​(4) Interest expense will remain unchanged.
​(5) The firm will pay cash dividends amounting to
35%
of net profits after taxes.
​(6) Cash and inventories will double.
​(7) Marketable​ securities, notes​ payable, long-term​ debt, and common stock will remain unchanged.
​(8) Accounts​ receivable, accounts​ payable, and other current liabilities will change in direct response to the change in sales.
​(9) A new computer system costing
$364,000
will be purchased during the year. Total depreciation expense for the year will be
$116,000.
​(10) The tax rate will remain at
40%.
a. Prepare a pro forma income statement for next​ year, using the fixed cost data given to improve the accuracy of the​ percent-of-sales method.
a. Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent-of-sales method. Complete the pro forma income statement for next year below: (Round to the nearest dollar.) Data table Pro Forma Income Statement Provincial Imports, Inc. for Next Year Provincial Imports, Inc. Income Statement for the Year Just Ended (percent-of-sales method) Sales revenue $5,006,000 Sales $ 6,006,000 Less: Cost of goods sold Gross profits Less: Operating expenses 2,741,000 Less: Cost of goods sold 3,089,182 $2,265,000 855,000 Gross profits 2,916,818 $1,410,000 Operating profits Less: Interest expense Less: Operating expenses 201,000 Net profits before taxes Less: Taxes (rate = 40%) Operating profits $ $1,209,000 483,600 Less: Interest expense Net profits after taxes $725,400 Net profits before taxes Less: Cash dividends 253,890 Less: Taxes (rate = 40%) To retained earnings $471,510 %3D Net profits after taxes (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Less: Cash dividends (35%) 365,229 Provincial Imports, Inc. Balance Sheet for the Year Just Ended To Retained earnings Assets Liabilities and Stockholders' Equity Accounts payable Taxes payable Cash $190,000 $700,000 Marketable securities 230,000 95,000 %24
Transcribed Image Text:a. Prepare a pro forma income statement for next year, using the fixed cost data given to improve the accuracy of the percent-of-sales method. Complete the pro forma income statement for next year below: (Round to the nearest dollar.) Data table Pro Forma Income Statement Provincial Imports, Inc. for Next Year Provincial Imports, Inc. Income Statement for the Year Just Ended (percent-of-sales method) Sales revenue $5,006,000 Sales $ 6,006,000 Less: Cost of goods sold Gross profits Less: Operating expenses 2,741,000 Less: Cost of goods sold 3,089,182 $2,265,000 855,000 Gross profits 2,916,818 $1,410,000 Operating profits Less: Interest expense Less: Operating expenses 201,000 Net profits before taxes Less: Taxes (rate = 40%) Operating profits $ $1,209,000 483,600 Less: Interest expense Net profits after taxes $725,400 Net profits before taxes Less: Cash dividends 253,890 Less: Taxes (rate = 40%) To retained earnings $471,510 %3D Net profits after taxes (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Less: Cash dividends (35%) 365,229 Provincial Imports, Inc. Balance Sheet for the Year Just Ended To Retained earnings Assets Liabilities and Stockholders' Equity Accounts payable Taxes payable Cash $190,000 $700,000 Marketable securities 230,000 95,000 %24
Data table $1,410,000 Operating profits Less: Interest expense 201,000 Net profits before taxes $1,209,000 Less: Taxes (rate = 40%) 483,600 Net profits after taxes $725,400 Less: Cash dividends 253,890 To retained earnings $471,510 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Provincial Imports, Inc. Balance Sheet for the Year Just Ended Assets Liabilities and Stockholders' Equity Accounts payable Taxes payable Notes payable Cash $190,000 $700,000 Marketable securities 230,000 95,000 Accounts receivable 635,000 205,000 Inventories 508,000 Other current liabilities 4,800 Total current assets $1,563,000 Total current liabilities $1,004,800 Net fixed assets 1,408,000 Long-term debt 512,200 Common stock 77,000 Retained earnings 1,377,000 Total assets $2,971,000 Total liabilities and equity $2,971,000
Transcribed Image Text:Data table $1,410,000 Operating profits Less: Interest expense 201,000 Net profits before taxes $1,209,000 Less: Taxes (rate = 40%) 483,600 Net profits after taxes $725,400 Less: Cash dividends 253,890 To retained earnings $471,510 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Provincial Imports, Inc. Balance Sheet for the Year Just Ended Assets Liabilities and Stockholders' Equity Accounts payable Taxes payable Notes payable Cash $190,000 $700,000 Marketable securities 230,000 95,000 Accounts receivable 635,000 205,000 Inventories 508,000 Other current liabilities 4,800 Total current assets $1,563,000 Total current liabilities $1,004,800 Net fixed assets 1,408,000 Long-term debt 512,200 Common stock 77,000 Retained earnings 1,377,000 Total assets $2,971,000 Total liabilities and equity $2,971,000
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