Table 4.7
The income statement and balance sheet for the ZZZ Mattress Co.for the year ended December 31,2018 follow. Balance Sheet
ZZZ Mattress Company
December 31,2018
-The ZZZ Mattress Co.has been requested by the 1st National Bank,a major creditor,to prepare a pro forma balance sheet for the year ending,December 31,2019.Using the percent-of-sales method and the following financial data,prepare the pro forma income statement and balance sheet and discuss the resulting external financing required.(See Table 4.7)
∙ 2019 sales are estimated at $330,000.
∙ Accounts receivable represent 20 percent of sales.
∙ A minimum cash balance of $1,650 is maintained.
∙ Inventory represents 32 percent of sales.
∙ Fixed-asset outlays in 2019 are $20,000.Total depreciation expense for 2019 will be $15,000.
∙ Accounts payable represents 15 percent of sales.
∙ Notes payable and accruals will remain the same.
∙ No long-term debt will be retired in 2019.
∙ No common stock will be repurchased in 2019.
∙ The firm will pay dividends equal to 50 percent of its earnings after taxes.

Question

Table 4.7
The income statement and balance sheet for the ZZZ Mattress Co.for the year ended December 31,2018 follow.  Balance Sheet
ZZZ Mattress Company
December 31,2018 
-The ZZZ Mattress Co.has been requested by the 1st National Bank,a major creditor,to prepare a pro forma balance sheet for the year ending,December 31,2019.Using the percent-of-sales method and the following financial data,prepare the pro forma income statement and balance sheet and discuss the resulting external financing required.(See Table 4.7)
∙ 2019 sales are estimated at $330,000.
∙ Accounts receivable represent 20 percent of sales.
∙ A minimum cash balance of $1,650 is maintained.
∙ Inventory represents 32 percent of sales.
∙ Fixed-asset outlays in 2019 are $20,000.Total depreciation expense for 2019 will be $15,000.
∙ Accounts payable represents 15 percent of sales.
∙ Notes payable and accruals will remain the same.
∙ No long-term debt will be retired in 2019.
∙ No common stock will be repurchased in 2019.
∙ The firm will pay dividends equal to 50 percent of its earnings after taxes.

Quizplus · Accepted Answer

The Answer of Table 4.7
The income statement and balance sheet for the ZZZ Mattress Co.for the year ended December 31,2018 follow.  Balance Sheet
ZZZ Mattress Company
December 31,2018 
-The ZZZ Mattress Co.has been requested by the 1st National Bank,a major creditor,to prepare a pro forma balance sheet for the year ending,December 31,2019.Using the percent-of-sales method and the following financial data,prepare the pro forma income statement and balance sheet and discuss the resulting external financing required.(See Table 4.7)
∙ 2019 sales are estimated at $330,000.
∙ Accounts receivable represent 20 percent of sales.
∙ A minimum cash balance of $1,650 is maintained.
∙ Inventory represents 32 percent of sales.
∙ Fixed-asset outlays in 2019 are $20,000.Total depreciation expense for 2019 will be $15,000.
∙ Accounts payable represents 15 percent of sales.
∙ Notes payable and accruals will remain the same.
∙ No long-term debt will be retired in 2019.
∙ No common stock will be repurchased in 2019.
∙ The firm will pay dividends equal to 50 percent of its earnings after taxes.

Table 4.7 The Income Statement and Balance Sheet for the ZZZ Mattress