Reference no: EM133575792

Prepare a pro forma income statement for the year ending December 31, 2013, using the fixed cost data provided to improve the accuracy of the percentage of sales method.

Prepare a pro forma balance sheet as of December 31, 2013, using the information provided and the critical method. Include a retained earnings adjustment account.

Analyze these financial statements and discuss the resulting required external financing.

Data:

Projected sales are $6,000,000.
Cost of goods sold in 2012 includes $1,000,000 in fixed costs.
Operating expenses in 2012 include $250,000 in fixed costs.
Interest expense remains unchanged.
The company will pay cash dividends in an amount equal to 40% of net profits after taxes.
Inventories and cash will double.
Marketable securities, notes payable, long-term debt, and common stock will remain unchanged.
Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales.
During the year a new computer system will be purchased at a cost of $356,000. Total depreciation expenses for the year will be $110,000.
The tax rate will remain at 40%.