You are preparing to discuss borrowing needs with your? bank'sloan officer who asks you to prepare? pro-forma financialstatements. Below are the financial statements for the year justended. Your sales department is projecting a 32?% increase insales. Days sales outstanding are expected to improve to 45 days.With respect to inventory and accounts? payable, assume thatpurchases will be ?$10,890,000 and cash payments will be?$9,801,000. The Company expects to invest ?$1,670,000 ?(net of?depreciation) to expand its storage capacity and achieve scalesavings. ? Accordingly, gross profit margins are expected to be25?% in the future. Other expenses are expected to remain the samepercentage of sales. The retention ratio is 45?%. For ease of?calculation, assume interest expense remains the same. Prepare?pro-forma financial statements and determine the amount ofborrowing? needs, which will be reflected in? long-term debt.?(round your answers to the nearest? integer, and fill in allamounts including? totals
Cash | 400,000 | | Sales | ?10,000,000 |
Accounts Receivable | ?1,400,000 | | Cost of Sales | ?8,000,000 |
Inventory | ?1,800,000 | | ??Gross Profit | ?2,000,000 |
??Total current Assets | ?3,600,000 | | Operating Expense | ?900,000 |
Fixed Assets | ?1,400,000 | | EBIT | ?1,100,000 |
Total Assets | ?5,000,000 | | Interest Exp | ?100,000 |
| | | EBT | ?1,000,000 |
Accounts Payable | ?1,200,000 | | Tax? (30%) | ?300,000 |
?Long-term Debt | ?1,000,000 | | Net Income | ?700,000 |
??Total Debt | ?2,200,000 | | | |
Common Stock | ?1,300,000 | | | |
Retained earnings | ?1,500,000 | | | |
??Total Debt and Equity | ?5,000,000 | | | |
