Home / Questions / The most recent financial statements for Retro Machine, Inc.,follow. Sales for 2014 are pr
The most recent financial statements for Retro Machine, Inc.,follow. Sales for 2014 are projected to grow by 20 percent.Interest expense will remain constant; the tax rate and thedividend payout rate will also remain constant. Costs, otherexpenses, current assets, fixed assets, and accounts payableincrease spontaneously with sales.
|
RETRO MACHINE, INC. 2013 Income Statement |
||||||
|
Sales |
|
|
|
$ |
760,000 |
|
|
Costs |
|
|
|
|
595,000 |
|
|
Other expenses |
|
|
|
|
16,000 |
|
|
|
|
|
|
|
|
|
|
Earnings beforeinterest and taxes |
|
|
|
$ |
149,000 |
|
|
Interest paid |
|
|
|
|
17,000 |
|
|
|
|
|
|
|
|
|
|
Taxable income |
|
|
|
$ |
132,000 |
|
|
Taxes (30%) |
|
|
|
|
39,600 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
$ |
92,400 |
|
|
|
|
|
|
|
|
|
|
Dividends |
$ |
18,480 |
|
|
|
|
|
Addition to retainedearnings |
|
73,920 |
|
|
|
|
|
|
||||||
|
RETRO MACHINE, INC. Balance Sheet as of December 31, 2013 |
|||||||
|
Assets |
|
Liabilities and Owners’ Equity |
|
||||
|
Current assets |
|
|
|
Currentliabilities |
|
|
|
|
Cash |
$ |
21,940 |
|
Accountspayable |
$ |
56,100 |
|
|
Accountsreceivable |
|
34,260 |
|
Notespayable |
|
15,300 |
|
|
|
|
|
|
|
|
|
|
|
Inventory |
|
71,220 |
|
Total |
$ |
71,400 |
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
127,420 |
|
Long-term debt |
$ |
143,000 |
|
|
Fixed assets |
|
|
|
Owners’ equity |
|
|
|
|
Netplant and equipment |
$ |
420,000 |
|
Commonstock and paid-in surplus |
$ |
129,000 |
|
|
|
|
|
|
Accumulated retained earnings |
|
204,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
333,020 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
547,420 |
|
Total liabilitiesand owners’ equity |
$ |
547,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
The firm is operating at full capacity and no new debt or equityis issued. Calculate the pro forma income statement and balancesheet for the company. (Do not round intermediatecalculations.) |
|
Pro Forma Income Statement |
|||
|
Sales |
$ |
|
|
|
Costs |
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
EBIT |
$ |
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
Taxable income |
$ |
|
|
|
Taxes (30%) |
|
|
|
|
|
|
|
|
|
Net income |
$ |
|
|
|
|
|
|
|
|
|
|||
|
Pro Forma Balance Sheet |
|||||||
|
Assets |
|
Liabilities and Owners’ Equity |
|
||||
|
Current assets |
|
|
|
Currentliabilities |
|
|
|
|
Cash |
$ |
|
|
Accountspayable |
$ |
|
|
|
Accountsreceivable |
|
|
|
Notespayable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory |
|
|
|
Total |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
|
|
Long-term debt |
$ |
|
|
|
Fixed assets |
|
|
|
Owners’ equity |
|
|
|
|
Netplant and equipment |
$ |
|
|
Commonstock and paid-in surplus |
$ |
|
|
|
|
|
|
|
Accumulated retained earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
|
|
Total liabilitiesand owners’ equity |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
What external financing is needed to support the 20 percentgrowth rate in sales? (Do not round intermediatecalculations.) |
|
EFN |
$ |
The most recent financial statements for Retro Machine, Inc.,follow. Sales for 2014 are projected to grow by 20 percent.Interest expense will remain constant; the tax rate and thedividend payout rate will also remain constant. Costs, otherexpenses, current assets, fixed assets, and accounts payableincrease spontaneously with sales.
|
RETRO MACHINE, INC. 2013 Income Statement |
||||||
|
Sales |
|
|
|
$ |
760,000 |
|
|
Costs |
|
|
|
|
595,000 |
|
|
Other expenses |
|
|
|
|
16,000 |
|
|
|
|
|
|
|
|
|
|
Earnings beforeinterest and taxes |
|
|
|
$ |
149,000 |
|
|
Interest paid |
|
|
|
|
17,000 |
|
|
|
|
|
|
|
|
|
|
Taxable income |
|
|
|
$ |
132,000 |
|
|
Taxes (30%) |
|
|
|
|
39,600 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
$ |
92,400 |
|
|
|
|
|
|
|
|
|
|
Dividends |
$ |
18,480 |
|
|
|
|
|
Addition to retainedearnings |
|
73,920 |
|
|
|
|
|
|
||||||
|
RETRO MACHINE, INC. Balance Sheet as of December 31, 2013 |
|||||||
|
Assets |
|
Liabilities and Owners’ Equity |
|
||||
|
Current assets |
|
|
|
Currentliabilities |
|
|
|
|
Cash |
$ |
21,940 |
|
Accountspayable |
$ |
56,100 |
|
|
Accountsreceivable |
|
34,260 |
|
Notespayable |
|
15,300 |
|
|
|
|
|
|
|
|
|
|
|
Inventory |
|
71,220 |
|
Total |
$ |
71,400 |
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
127,420 |
|
Long-term debt |
$ |
143,000 |
|
|
Fixed assets |
|
|
|
Owners’ equity |
|
|
|
|
Netplant and equipment |
$ |
420,000 |
|
Commonstock and paid-in surplus |
$ |
129,000 |
|
|
|
|
|
|
Accumulated retained earnings |
|
204,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
333,020 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
547,420 |
|
Total liabilitiesand owners’ equity |
$ |
547,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
The firm is operating at full capacity and no new debt or equityis issued. Calculate the pro forma income statement and balancesheet for the company. (Do not round intermediatecalculations.) |
|
Pro Forma Income Statement |
|||
|
Sales |
$ |
|
|
|
Costs |
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
EBIT |
$ |
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
Taxable income |
$ |
|
|
|
Taxes (30%) |
|
|
|
|
|
|
|
|
|
Net income |
$ |
|
|
|
|
|
|
|
|
|
|||
|
Pro Forma Balance Sheet |
|||||||
|
Assets |
|
Liabilities and Owners’ Equity |
|
||||
|
Current assets |
|
|
|
Currentliabilities |
|
|
|
|
Cash |
$ |
|
|
Accountspayable |
$ |
|
|
|
Accountsreceivable |
|
|
|
Notespayable |
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory |
|
|
|
Total |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
|
|
Long-term debt |
$ |
|
|
|
Fixed assets |
|
|
|
Owners’ equity |
|
|
|
|
Netplant and equipment |
$ |
|
|
Commonstock and paid-in surplus |
$ |
|
|
|
|
|
|
|
Accumulated retained earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
|
|
Total liabilitiesand owners’ equity |
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
What external financing is needed to support the 20 percentgrowth rate in sales? (Do not round intermediatecalculations.) |
|
EFN |
$ |
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