Question

Consider the following simplified financial statements for the Steveston Corporation (assuming no income taxes):

Statement of Comprehensive Income				Statement of Financial Position
Sales	$	32,000		Assets	$	25,300		Debt	$	5,800
Costs		24,400						Equity		19,500
Net income	$	7,600		Total	$	25,300		Total	$	25,300

Steveston has predicted a sales increase of 15 percent. It has predicted that every item on the statement of financial position will increase by 15 percent as well.

  

Create the pro forma statements and reconcile them. (Input all amounts as positive values.)

Pro Forma Statement of Comprehensive Income			Pro Forma Statement of Financial Position
Sales	$		Assets	$		Debt	$
Costs						Equity
Net income	$		Total	$		Total	$

What is the plug variable?

The plug variable is (Click to select)dividends paidretained earnings in the amount of $ .

Answer 1

Pro Forma Statement of Comprehensive Income			Pro Forma Statement of Financial Position
Sales (32000+15%)	$               36,800		Assets (25300+15%)	$        29,095		Debt (5800+15%)	$          6,670
Costs (24400+15%)	$               28,060					Equity	$        22,425
Net income	$                 8,740		Total	$        29,095		Total	$        29,095

Equity will not increase by the same percentage as other assets.

Equity = Total Assets - Total Liabilities = 29095 - 6670 = $22,425

Increase in Equity = 22425 - 19500 = 2925

Net income is $8740 but equity increased only by $2925,therefore dividend must be distributed.

Dividend = 8740 - 2925 = $5815