Problems

ANSWERS TO ASSIGNMENT 3 1.It is important to remember that candor testament not maturation by the same percentage as the opposite assets. If every other item on the income description and remnant shroud join ons by 10 percent, the pro forma income description and eternal rest canvass will look same this: pro forma income statement pro forma eternal rest winding- sail sales$17,600Assets$9,790Debt$5,610 Costs13,750 justice4,180 plunder income$3,850 numerate$9,790 summation$9,790 In hunting lodge for the rest sheet to balance, lawfulness must(prenominal) be: integrity = numerate liabilities and Equity Debt Equity = $9,790 5,610 Equity = $4,180 Equity increased by: Equity increase = $4,180 3,800 Equity increase = $380 enlighten income is $3,850 further equity only increased by $380. Thus, a dividend of $3,850 $380 or $3470 must have been paid. Dividends is the plug variable. 2.Here we are g iven the dividend amount, so dividends is not a plug variable. If the company pays out one-half of its net income as dividends, the pro forma income statement and balance sheet will look like this: professional person forma income statement Pro forma balance sheet Sales$17,600Assets$9,790Debt$5,100 Costs13,750Equity5,725 Net income$3,850Total$9,790Total$10,825 Dividends$1,925 Add.

to RE1,925 Note that the balance sheet does not balance. This is due to EFN which is: EFN = Total assets Total liabilities and equity EFN = $9,790 10,825 EFN = $1,035 3.An increase of sales to $5,192 is an increase of: Sales increase = ! ($5,192 $4,400) / $4,400 Sales increase = .18 or 18% Assuming costs and assets increase proportionally, the pro forma financial statements will look like this: Pro forma income statement Pro forma balance sheet Sales$5,192Assets$15,812Debt$9,100 Costs3,168Equity6,324 Net income$2,024Total$15,812Total$15,424 If no dividends are...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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