Question

The Del Rio Derrick Co. has the following statements from 2018:

Income Statement

Sales                          $650,000

- COGS                      507,000

Gross Profits             $143,000

- Expenses                -   91,000

EBIT                           $ 52,000

-Interest                      $ 12,800

EBT                            $ 39,200

- Taxes                       $    9,408

EAT                            $   29,792

Balance Sheet

                                                                        Current liabilities                 $80,000

Current Assets         $136,500                             L-T Debt                              $160,000

Fixed Assets              563,500                             Equity                                  460,000

Total Assets               700,000                               Total Liabilities

                                                                                      & Equity                             $700,000

The firm expects that sales will increase by 14 percent, COGS will remain at their same percentage of sales as now and that expenses will decrease by 2% from their current percentage of sales. Current assets are expected to rise by 5% from their current percentage of sales while fixed assets will rise by $100,000. No sale of stock is expected. Interest will only be on long-term debt, which is expected to rise by $20,000, and will be at a 9% rate. Taxes will be at the same rate as 2018.   No dividends are paid and any shortfalls should be made up in current liabilities.

Prepare a 2019 pro forma income statement and balance sheet, properly labeled.

Answer 1