P3-19. LG 5: Integrative–Pro Forma Statements
Challenge
(a)
Pro Forma Income Statement
Provincial Imports, Inc.
for the Year Ended December 31, 2007
(percent-of-sales method)
Sales $6,000,000
Less: Cost of goods sold (0.35 × sales + $1,000,000) 3,100,000...
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P3-19. LG 5: Integrative–Pro Forma Statements
Challenge
(a)
Pro Forma Income Statement
Provincial Imports, Inc.
for the Year Ended December 31, 2007
(percent-of-sales method)
Sales $6,000,000
Less: Cost of goods sold (0.35 × sales + $1,000,000) 3,100,000
Gross profits $2,900,000
Less: Operating expenses (0.12 × sales + $250,000) 970,000
Operating profits $1,930,000
Less: Interest Expense 200,000
Net profits before taxes $1,730,000
Less: Taxes (0.40 × NPBT) 692,000
Net profits after taxes $1,038,000
Less: Cash dividends (0.40 × NPAT) 415,200
To Retained earnings $622,800
(b)
Pro Forma Balance Sheet
Provincial Imports, Inc.
December 31, 2007
(Judgmental Method)
Assets Liabilities and Equity
Cash $400,000 Accounts payable $840,000
Marketable
securities
275,000 Taxes payable 138,4001
Notes payable 200,000
Accounts
receivable
750,000 Other current
liabilities
6,000
Inventories 1,000,000 Current liabilities $1,184,400
Current assets $2,425,000 Long-term debt 550,000
Net fixed assets 1,6
Less
