Problem 1
| Pro Forma Income Statement and Balance Sheet |
| Below is the income statement and balance sheet for Blue Bill Corporation for 2013. Based on the historical statements and the |
| additional information provided, construct the firm’s pro forma income statement and balance sheet for 2014. |
| Blue Bill Corporation |
| Income Statement |
| For the year ended 2013 |
|
|
|
Projected |
|
2012 |
2013 |
|
2014 |
| Revenue |
$60,000 |
$63,000 |
| Cost of goods sold |
42,000 |
44,100 |
| Gross margin |
18,000 |
18,900 |
| SG&A expense |
6,000 |
6,300 |
| Depreciation expense |
1,800 |
2,000 |
| Earnings Before Interest and Taxes (EBIT) |
10,200 |
10,600 |
| Interest expense |
1,500 |
1,800 |
| Taxable income |
8,700 |
8,800 |
| Income Tax Expense |
3,045 |
3,080 |
| Net income |
5,655 |
5,720 |
| Dividends |
750 |
800 |
| To retained earnings |
$4,905 |
$4,920 |
| Additional income statement information: |
| Sales will increase by 5% in 2014 from 2013 levels. |
| COGS and SG&A will be the average percent of sales for the last 2 years. |
| Depreciation expense will increase to $2,200. |
| Interest expense will be $1,900. |
| The tax rate is 35%. |
| Dividend payout will increase to $850. |
| Blue Bill Corporation |
| Balance Sheet |
| December 31, 2013 |
|
|
|
Projected |
|
2013 |
|
|
2014 |
| Current assets |
| Cash |
$8,000 |
| Accounts receivable |
3,150 |
| Inventory |
9,450 |
| Total current assets |
20,600 |
| Property, plant, and equipment (PP&E) |
28,500 |
| Accumulated depreciation |
16,400 |
| Net PP&E |
12,100 |
| Total assets |
$32,700 |
| Current liabilites |
| Accounts payable |
$3,780 |
| Bank loan (10%) |
3,200 |
| Other current liabilities |
1,250 |
| Total current liabilities |
8,230 |
| Long-term debt (12%) |
4,800 |
| Common stock |
1,250 |
| Retained earnings |
18,420 |
| Total liabilities and equity |
$32,700 |
| Additional balance sheet information: |
| The minimum cash balance is 12% of sales. |
| Working capital accounts (accounts receivable, accounts payable, and inventory) will be the same percent of sales in 2014 as they were in 2013. |
| $8,350 of new PP&E will be purchased in 2014. |
| Other current liabilities will be 3% of sales in 2014. |
| There will be no changes in the common stock or long-term debt accounts. |
| The plug figure (the last number entered that makes the balance sheet balance) is bank loan. |
