Question

  Peabody​ & Peabody has 2018 sales of $10.8 million. It wishes to analyze expected performance and financing needs for 2021—2

years ahead. Given the following​ information, respond to parts a. and b.​

(1) The percents of sales for items that vary directly with sales are as​ follows: Accounts​ receivable; 11.6%​, inventory; 17.6%​;

Accounts​ payable, 13.6%​;

Net profit​ margin, 2.9%.

​(2) Marketable securities and other current liabilities are expected to remain unchanged.

​(3) A minimum cash balance of $485,000 is desired.​

(4) A new machine costing $654,000 will be acquired in 2020​, and equipment costing $852,000 will be purchased in

2021. Total depreciation in 2020 is forecast as $286,000​, and in 2021 $386,000 of depreciation will be taken.​

(5) Accruals are expected to rise to $495,000 by the end of 2021.

​(6) No sale or retirement of​ long-term debt is expected.

​(7) No sale or repurchase of common stock is expected.

​(8) The dividend payout of 50% of net profits is expected to continue.​

(9) Sales are expected to be $11.9 million in 2020 and $11.9 million in 2021.

​(10) The December​ 31, 2019​, balance sheet is here

.a. Prepare a pro forma balance sheet dated December​ 31,2021.

b. Discuss the financing changes suggested by the statement prepared in part

​(a​).

a. Prepare a pro forma balance sheet dated December​ 31,2021.

Complete the assets part of the pro forma balance sheet for Peabody​ & Peabody for December​ 31,2021 ​below:  ​(Round to the nearest​ dollar.)

Pro Forma Balance Sheet

Peabody & Peabody

December 31, 2021

Assets

Current assets

Cash

$

Marketable securities

$

Accounts receivable

$

Inventories

$

Total current assets

$

Net fixed assets

$

Total assets

$

Leonard Industries Balance Sheet December​ 31, 20192019
Assets			Liabilities and​ Stockholders' Equity
Cash	$401,000		Accounts payable	$1,395,000
Marketable securities	202,000		Accruals	405,000
Accounts receivable	1,201,000		Other current liabilities	80,500
Inventories	1,799,000		Total current liabilities	$1,880,500
Total current assets	$3,603,000		​Long-term debt	2,003,500
Net fixed assets	3,997,000		Common stock	3,716,000
Total assets	Modifying $7,600,000		Total liabilities and ​stockholders' equity

Answer 1

Pro Forma Balance Sheet
Peabody and peabody
Dec 31. 2021
Assets	Amount ($)
Cash	485,000
Marketable securities	202,000
Accounts receivable (11.6% x $11.9 M)	1,380,400
Inventories (17.6% x $11.9 M)	2,094,400
Fixed assets (WN)	4,831,000
	8,992,800

WN:

Beg. fixed assets (2020)	3,997,000
+ New machine	654,000
- Depreciation	(286,000)
+ Equipment (2021)	852,000
- Depreciation	(386,000)
End. fixed assets (2021)	4,831,000