Barry’s Superstore wishes to prepare financial plans. Use the financial statements on the next page and the other information provided below to prepare the financial plans.The following financial data are also available:(1) The firm has estimated that its sales for next year will be $130,000.(2) The firm expects to pay $30,000 in cash dividends.(3) The firm wishes to maintain a minimum cash balance of $25,000.(4) Accounts receivable represent approximately 20% of annual sales.(5) The firm’s ending inventory represents 60% of Cost of Goods Sold.(6) A new machine costing $15,000 will be purchased next year.(7) Accounts payable will increase by 5%.(8) Unearned Revenue will be earned.(9) Notes Payable would decrease by $5000.(10) Short-Term Investments and common stock will remain unchanged. Requirement: Prepare a pro forma income statement for the year ended December 31, 2021, using the percent-of-sales method. Tax Rate is expected to be 15%. Prepare a pro forma balance sheet dated December 31, 2021, using the judgmental approach. Analyze these statements, and discuss the resulting external financing required. BARRY'S SUPERSTOREBARRY'S SUPERSTOREComparative Year-End Income StatementsComparative Year-End Balance SheetsPrior YearCurrent YearPrior Year Current YearAssets:CashNet Sales$100,000$120,000Cost of Goods Sold50.00060,000$90,000$110,000Gross Profit50,00060,000Accounts Receivable20,00030,00035,00015,000160,00040,000$200.000Inventory40,0005,00020,000200.00050,000$250.000Rent ExpenseDepreciation Expense5,500Short-Term Investments2.5003,600Total Current AsstesSalaries ExpenseUtlity Expense3,0005,400EquipmentTotal Assets1.5002,500Operating Income38,00043,000Liabilities:$ 75.00025.000100,000Accounts Payable$ 60.000Interest Expense3,0002,000Unearned Revenue10.000Income Tax Expense70,0005.000$ 30,0006,000Total Current LiabilitiesNet Income$ 35,000Notes PayableTotal Liabilities40,000110,00050,000150.000Stockholder EquityCommon Stock75,00080.000Ending Retained EarningsTotal Stockholder EquityTotal Liabilities and Stockholder Equity20.000100.00015,00090,000$200.000$250.000

The following points need to be followed, The values of goods to be sold is having 50% based on the…

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Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter7: Receivables And Investments

Section: Chapter Questions

Problem 7.17E

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Question

Barry’s Superstore wishes to prepare financial plans. Use the financial statements on the next page and the other information provided below to prepare the financial plans.

The following financial data are also available:

(1) The firm has estimated that its sales for next year will be $130,000.

(2) The firm expects to pay $30,000 in cash dividends.

(3) The firm wishes to maintain a minimum cash balance of $25,000.

(4) Accounts receivable represent approximately 20% of annual sales.

(5) The firm’s ending inventory represents 60% of Cost of Goods Sold.

(6) A new machine costing $15,000 will be purchased next year.

(7) Accounts payable will increase by 5%.

(8) Unearned Revenue will be earned.

(9) Notes Payable would decrease by $5000.

(10) Short-Term Investments and common stock will remain unchanged.

Requirement:

Prepare a pro forma income statement for the year ended December 31, 2021, using the percent-of-sales method. Tax Rate is expected to be 15%.
Prepare a pro forma balance sheet dated December 31, 2021, using the judgmental approach.
Analyze these statements, and discuss the resulting external financing required.

BARRY'S SUPERSTORE
BARRY'S SUPERSTORE
Comparative Year-End Income Statements
Comparative Year-End Balance Sheets
Prior Year
Current Year
Prior Year Current Year
Assets:
Cash
Net Sales
$100,000
$120,000
Cost of Goods Sold
50.000
60,000
$90,000
$110,000
Gross Profit
50,000
60,000
Accounts Receivable
20,000
30,000
35,000
15,000
160,000
40,000
$200.000
Inventory
40,000
5,000
20,000
200.000
50,000
$250.000
Rent Expense
Depreciation Expense
5,500
Short-Term Investments
2.500
3,600
Total Current Asstes
Salaries Expense
Utlity Expense
3,000
5,400
Equipment
Total Assets
1.500
2,500
Operating Income
38,000
43,000
Liabilities:
$ 75.000
25.000
100,000
Accounts Payable
$ 60.000
Interest Expense
3,000
2,000
Unearned Revenue
10.000
Income Tax Expense
70,000
5.000
$ 30,000
6,000
Total Current Liabilities
Net Income
$ 35,000
Notes Payable
Total Liabilities
40,000
110,000
50,000
150.000
Stockholder Equity
Common Stock
75,000
80.000
Ending Retained Earnings
Total Stockholder Equity
Total Liabilities and Stockholder Equity
20.000
100.000
15,000
90,000
$200.000
$250.000

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