O'Connor Inc.is planning to purchase some new equipment.With this new equipment, the company expects sales to increase from $8 000,000 to $10,000,000.A portion of the financing for the purchase of the equipment will come from a $1 000,000 new common stock issue.The company knows that current assets, fixed assets, accounts payable and accrued expenses increase in direct proportion with sales.The company's net profit margin on sales is 8%, and the company plans to pay 40% of its after-tax earnings in dividends.A copy of the company's current balance sheet is given below:
O'Connor Inc.Balance Sheet
Prepare a pro forma balance sheet for O'Connor for next year using the percentage-of-sales method and the information provided above.

Question

O'Connor Inc.is planning to purchase some new equipment.With this new equipment, the company expects sales to increase from $8 000,000 to $10,000,000.A portion of the financing for the purchase of the equipment will come from a $1 000,000 new common stock issue.The company knows that current assets, fixed assets, accounts payable and accrued expenses increase in direct proportion with sales.The company's net profit margin on sales is 8%, and the company plans to pay 40% of its after-tax earnings in dividends.A copy of the company's current balance sheet is given below:
O'Connor Inc.Balance Sheet
  Prepare a pro forma balance sheet for O'Connor for next year using the percentage-of-sales method and the information provided above.

Quizplus · Accepted Answer

The Answer of O'Connor Inc.is planning to purchase some new equipment.With this new equipment, the company expects sales to increase from $8 000,000 to $10,000,000.A portion of the financing for the purchase of the equipment will come from a $1 000,000 new common stock issue.The company knows that current assets, fixed assets, accounts payable and accrued expenses increase in direct proportion with sales.The company's net profit margin on sales is 8%, and the company plans to pay 40% of its after-tax earnings in dividends.A copy of the company's current balance sheet is given below:
O'Connor Inc.Balance Sheet
  Prepare a pro forma balance sheet for O'Connor for next year using the percentage-of-sales method and the information provided above.