Table 4.7 The Income Statement and Balance Sheet for the ZZZ Mattress

Essay

Table 4.7
The income statement and balance sheet for the ZZZ Mattress Co. for the year ended December 31, 2015 follow. Balance Sheet
ZZZ Mattress Company
December 31, 2015 The ZZZ Mattress Co. has been requested by the 1st National Bank, a major creditor, to prepare a pro forma balance sheet for the year ending, December 31, 2016. Using the percent-of-sales method and the following financial data, prepare the pro forma income statement and balance sheet and discuss the resulting external financing required. (See Table 4.7)
∙ 2016 sales are estimated at $330,000.
∙ Accounts receivable represent 20 percent of sales.
∙ A minimum cash balance of $1,650 is maintained.
∙ Inventory represents 32 percent of sales.
∙ Fixed-asset outlays in 2006 are $20,000. Total depreciation expense for 2016 will be $15,000.
∙ Accounts payable represents 15 percent of sales.
∙ Notes payable and accruals will remain the same.
∙ No long-term debt will be retired in 2016.
∙ No common stock will be repurchased in 2016.
∙ The firm will pay dividends equal to 50 percent of its earnings after taxes.